Hello Sreekanth,
I am Kari and I am all new to the world of equity. And after a few days reading your blog, I am beginning to understand the importance of Financial Planning. All thanks to you and your excellent advice.
I am touching 32 in a couple of months and though I know I'm a little late in the Personal Financial Planning bandwagon, I just hope its better late than never. I am planning to get married in a couple of years and do not have any dependents as of now.
My portfolio looks like this -
Present Monthly Salary - Rs. 48000/-pm (Increments of 3-4000 a year)
I have a GPF account - Rs. 5000/- pm with a present fund value of Rs. 5,00,000/-
Last year I took a loan (Interest free ofcourse) from my father for Rs.10 lakhs and bought a plot of land (now already valued for Rs. 14 lakhs.) So we have come to an agreement that I pay him monthly EMIs of Rs. 10,000/- pm. Totally I have property of about 85000 sq.ft valued at Rs. 35 lakhs. I will also in a few years inherit a property (house) presently valued at Rs. 1.5 crores with Rent value of Rs.45 -50000 pm.
I do not have any Gold investments. I have a 1995 model RX-135 motorcycle and a 2009 model Maruti Suzuki A-Star car.
My employer covers my entire Health and Hospital bills.
Also I am exempted from payment of Income Tax so I think ELSS funds will be meaningless to me.
My current average monthly spending is about Rs. 15000/- pm
Now to start my Financial Planning I have the following things to do -
1. Keep an Emergency fund of Rs. 3 lakhs as either FD or one of those debt funds. ( Amount already available with me)
2. Buy a regular Term Insurance with Life cover of Rs. 1 crore for around Rs. 12000 annual premium so about Rs.1000 pm
3. I also want to keep Rs. 2500 pm in the bank just for easy liquidity.
That leaves me with about Rs. 15000 pm as excess money which I want to get into equity. Since I am new to all of this, I thought getting into SIPs would be a better option.
My goals are shown below.
Start of SIP
Year
No. of Years
SIP Amount
Goal
2016
Retirement
2042
26
8000
5 crores
Build House
2043
27
7000
5 crores
2017
Kids College 1
2036
19
3500
60 lakhs
2018
Kids College 2
2038
20
3500
70 lakhs
2019
Kids Wedding 1
2046
27
2000
90 lakhs
Kids Wedding 2
2048
29
2000
1 crores
2020
Family Holiday 2
2049
29
1200
80 lakhs
Family Holiday 1
2035
15
2300
20 lakhs
2021
Car 2
2039
18
4500
70 lakhs
As you can see my goals all more than 15 years old.
I have kept aside Rs. 15000 pm for investing in SIPs for my first year. Thereafter increasing my investments in more SIPs to achieve my other goals, annually. I have my sights set for 2021 as for now. After which I know my monthly financial expenditures will increase considerably.
My request from you is to advice me on which funds should I invest to achieve my goals based on my portfolio. Since my goals are all long term, (15 years and above), I would like to think that my risk appetite as aggressive. So please advice whether I should focus my SIPs on Mid & Small Cap funds, and if yes or no, which ones to go for. I hope I am not too way off with my goals.
Thank you for a patient hearing and advice in advance.
Best Wishes,
Karikor Kharkongor
//
23 Answers
Dear Karikor,
You have almost shared all of your Personal finance details here. Appreciate that!
1 - As you do not have dependents or almost NIL liabilities, you can postpone buying a Term plan to a later date.
2 - Suggest you to buy a Personal Accident insurance plan. Read : Best Personal Accident insurance plans.
3 - Is your health cover (employer's) available even after your retirement?
4 - You may start creating your Emergency Fund (around 6 times of your monthly expenses, till the time you inherit the Rent yielding property). Save in a mix of Cash + FD + Liquid fund/Arbitrage fund. Read:
5 - Kindly use the calculators available in the below articles to calculate the approx required savings amount to reach your long-term goal values;
6 - Suggest you to invest as much as possible and as frequently as possible for the next 2 to 3 years (till your marriage year) in Small cap funds. Are you planning to save for your Marriage expenses? or Are they already taken care of?
7) May I know the reason for exemption from Income Tax (You may skip answering this question :) )
Hi Sreekanth,
Thank you so much for taking your time to go through my profile and addressing my queries. I really appreciate it. Now my response to your points are as follow:-
1 – As you do not have dependents or almost NIL liabilities, you can postpone buying a Term plan to a later date.
Then I will get one as a wedding gift.
2 – Suggest you to buy a Personal Accident insurance plan. Read : Best Personal Accident insurance plans. I shall definitely go through it.
3 – Is your health cover (employer’s) available even after your retirement? Fortunately, yes my health cover is even after retirement.
4 – You may start creating your Emergency Fund (around 6 times of your monthly expenses, till the time you inherit the Rent yielding property). Save in a mix of Cash + FD + Liquid fund/Arbitrage fund. Read: I am keeping Rs. 3 lakhs as emergency fund, which is actually 6 months pay. Now should I go ahead and equally distribute the amount as in Rs. 1 lakh, cash, 1 lakh in FD and the other lakh in Debt/Arbitrage funds? 5 – Kindly use the calculators available in the below articles to calculate the approx required savings amount to reach your long-term goal values;
2 – Suggest you to buy a Personal Accident insurance plan. Read : Best Personal Accident insurance plans. I shall definitely go through it.
3 – Is your health cover (employer’s) available even after your retirement? Fortunately, yes my health cover is even after retirement.
4 – You may start creating your Emergency Fund (around 6 times of your monthly expenses, till the time you inherit the Rent yielding property). Save in a mix of Cash + FD + Liquid fund/Arbitrage fund. Read: I am keeping Rs. 3 lakhs as emergency fund, which is actually 6 months pay. Now should I go ahead and equally distribute the amount as in Rs. 1 lakh, cash, 1 lakh in FD and the other lakh in Debt/Arbitrage funds? 5 – Kindly use the calculators available in the below articles to calculate the approx required savings amount to reach your long-term goal values;
- Calculate the Future value of your investments.
- Retirement goal planning calculator.
- Kid’s education goal calculator.
- SIP for Retirement till 2042. No. of Years - 26. SIP amount - 8000. Goal - 500 lakhs
- SIP for building House in 2043. No of Years - 27 . SIP amount - 7000. Goal - 500 lakhs
- SIP for 1st Kids College in 2036. No. of years -19. SIP amount -3500. Goal -60 lakhs
- SIP for 2nd Kids College in 2038. No. of years - 20. SIP amount - 3500. Goal - 70 lakhs
- SIP for 1st Kids Wedding in 2046. No. of years -27. SIP amount - 2000. Goal - 90 lakhs
- SIP for 2nd Kids Wedding in 2048. No. of years - 29. SIP amount - 2000. Goal - 100 lakhs
- SIP for 2nd Family Holiday in 2049. No. of years - 29. SIP amount -1200. Goal - 80 lakhs
- SIP for 1st Family Holiday in 2035. No. of years - 15. SIP amount -2300. Goal - 20 lakhs.
- SIP for Car in 2039. No. of years - 18. SIP amount - 4500. Goal - 70 lakhs
Sure dear. You may revert to me if you require any more details. As of now, let me mark this thread as RESOLVED. You may continue this thread by posting a query again and the Thread will be again marked as OPEN.
All the best!
Hi Sreekanth,
I have done some homework and the more I read, the more doubts I get, which I feel is very good. So I am back with some doubts that I hope you will be able to help me with. I have gone through some of your posts on investing in Direct Mutual Funds. I have come across also some of the Online Investing Platforms that enable direct investment into funds with a fixed fee. And this is my latest update. Today I went to the Karvy Office (luckily I found one available in my small city). I asked about KYC and CAN forms. There is only one person dealing with matter and she is on long leave. Hence my queries are now directed to you. So please bear with me.
I have done some homework and the more I read, the more doubts I get, which I feel is very good. So I am back with some doubts that I hope you will be able to help me with. I have gone through some of your posts on investing in Direct Mutual Funds. I have come across also some of the Online Investing Platforms that enable direct investment into funds with a fixed fee. And this is my latest update. Today I went to the Karvy Office (luckily I found one available in my small city). I asked about KYC and CAN forms. There is only one person dealing with matter and she is on long leave. Hence my queries are now directed to you. So please bear with me.
- What is the purpose of a Karvy office?
- Can I do direct online investment with just KYC and CAN forms?
- Do we need separarate KYCs for separate AMCs?
- CAN is for MFutility, so will it work if I invest in other platforms like Investopia?
- What documents will I require for investing in Online investing platforms?
- Do I have to pay commission if I invest through MFutility? Will MFutility give me advisory like other paid platforms?
- I tried registering in some AMC websites for investing, they asked for Folio number, what is Folio Number?
- How safe are paid investment platforms? Which is better- MFutility or paid Investing platforms?
- I also checked eKYC from quantum. The person in Karvy just said that I need KYC acknowledgement, PAN card no & Cancelled cheque to open CAN account. Will the eKYC suffice?
- The Karvy office fellow says that they process KYCs which are sent by Banks & AMC branch offices of investors bearing ARN no of agent is mandatory. If that is the case, then how does eKYC work?
- Kindly tell me what all things/documents I need to do to invest directly without going through agents or distributors?
Dear,
1 - It is an integrated financial services provider, offering wide range of financial products and services. They process KYC forms, they accept MF investments, they provide Registrar services, they sell almost all kinds of financial products.
2 - Yes.
3 - No.
4 - Yes, i believe. But kindly check with the respective Product provider too.
5 - Generally Application form. PAN card copy, Address proof, Bank cheque leaf-cancelled, etc. Can vary from provider to provider.
6 - No Fees. Advisory - I dont think so.
7 - Some AMCs accept online investments only if you have already invested in scheme. Folio no is unique number it is like your bank account number.
8 - No comments.
9 , 10 & 11 - Read:
http://www.relakhs.com/ekyc-for-mutual-fund-investments-by-quantum-reliance-mutual-fund-houses/
If you would like to invest through Karvy, then they will quote their AMFI number to get commission from your investments.
Hi Sreekanth Sir,
I want take health insurance policy. which one is the best. I am 31 years old. I pay 1000 or 1500 per month. Plz suggest me sir.
How to withdraw SIP amount sir?
Dear Sreekanth,
Thank you so much for being prompt in replying. I really do appreciate all your efforts.
Things are slowly becoming clearer. I think I will be confident enough to start investing in a few weeks time.
Thank you again for the links. I will try to do the eKYC from quantum. I will visit the Karvy Office again just to apply for the CAN number. Have not thought of investing through them as I am trying my best to escape the commission web cycle.
Now just another doubt is whether I will need CAN no. while using websites like-
Invezta.com
Orowealth.com
Bharosaclub.com
Unovest.com If not, then why do the CAN no as I find that the fees charged by such sites are pretty reasonable. I will also need to know what other documents I will need to be able to start their services. Sincere Regards, Kari
Invezta.com
Orowealth.com
Bharosaclub.com
Unovest.com If not, then why do the CAN no as I find that the fees charged by such sites are pretty reasonable. I will also need to know what other documents I will need to be able to start their services. Sincere Regards, Kari
Hi,
The referred websites use CAN to re-direct your transactions to MF Utility. That means, they will execute your transactions through MFU only. (Kindly re-check with them).
Regarding 'transaction execution' services, it would be better if you contact the respective Service providers for more details. I do not have real-time experience of these platforms.
Dear,
I think with all your advice I will be able to do my investments wisely. After all with SIPs I don't think it will be that tedious. Plus I would invest in new SIP funds twice a year max. So I think I will stick to MFUtility and just get my KYC & CAN no. done.
As for the investments to be made, as you had suggested, I am thinking of the following funds.
A. Emergency Fund
1. Cash in Hand - Rs. 1.00 lakhs
2. F D - Rs. 1.00 lakhs for 5 years
3. Debt Mutual Funds - Rs. 1.00 lakhs for 3 years
My choice is to go for the SBI Magnum Gilt LTP Fund (G) or the L&T Gilt Fund (G)
B. Equity Mutual Funds
You did advice me to invest first in Small Caps. So after some research I have shortlisted the following-
- Franklin India Smaller Companies Fund (G)-Direct - 69 holdings
- DSP Black Rock Micro Cap Fund (G) - Direct - 61 holdings
- Mirea Asset Emerging Bluechip Fund (G) - Direct - 65 holdings
Hi dear,
Looks fine. Do check out the Percentage of overlap than number of holdings. Easy way to interpret the overlap :)
Also, do consider the suggested insurance requirements, especially Personal Accident insurance cover.
All the best dear! Happy investing!
Sreekanth,
I have another small doubt that I hope you can resolve . When you adviced me " Suggest you to invest as much as possible and as frequently as possible for the next 2 to 3 years (till your marriage year) in Small cap funds." Did you mean I should invest in small caps just for 3 years? I also noticed that 3 years return for them is around 35-45%. I am confused since I was planning to invest in small funds for 20-25 years period. I hope you can clear this little doubt of mine.
Thanks again
Kari
Hi,
You can invest in Small cap or high risk funds till 2 to 3 years before the goal target dates.
I have suggested for next 3 years, so that you can evaluate your financial position (after marriage) and can review your investment strategy. Nothing else! :)
Hi Sreekanth,
I hope you have been very busy helping people like me. I also have been busy doing some ground work on my investments. So here is the latest update on my Investments.
Emergency Fund:-
Rs. 1 lakh invested in SBI Magnum Gilt Long Term Growth fund
Rs. 1 lakh in IDFC Bank Fixed Deposit with 8.25% interest
Waiting for next opportunity to invest another Rs. 1 lakh in Gold Sovereign bonds with 2.75% interest
Rs. 1 lakh will be in cash in Yes Bank savings account with 6% interest.
Insurance:-
Is it okay if I go with Max Life Online Term Plan with 1.2 crore cover along with accidental insurance riders (40 lakh cover) for 30 years for a premium amount of about 13-15k a year? The premiums for the other companies like ICICI and HDFC seems to be on the higher side. Also can I change nominee name at a later date?
I am just about to finalize on the same.
Equity:-
I have visited a Karvy office located in my city and will get a CAN number soon so that I will be able to invest directly through MF Utility platform.
As for funds, I thought I had got it figured atleast for the year 2016 . My initial choice were:-
a. Retirement Fund - 25 years - 5000 SIP - DSP Black Rock Micro Cap Fund Growth Direct
b. House Fund - 25 years - 10000 SIP - Franklin India Smaller Companies Growth Direct
For the year 2017, I have different goals with different timelines.
However, I was going through ValueResearchOnline's report on Top 100 Most Profitable Companies in India, I found out the following :-
- Only 4 companies under DSPBR Micro Fund Portfolio holdings are in the Top 100
- 22 companies under Franklin India Smaller Companies Fund are in the Top 100
- 19 companies under Mirea Asset Emerging Bluechip Fund are in the Top 100
- 15 companies under SBI Magnum Midcap Fund are in the Top 100
- If I choose Franklin India Smaller Companies Fund and DSPBR Micro cap Fund means I would have invested in 25 Top 100 Most Profitable Companies
- If I choose Franklin India Smaller Companies Fund and Mirea Asset Emerging Bluechip Fund , I would have invested in 38 Top 100 Most Profitable Companies
- If I choose Franklin India Smaller Companies Fund and SBI Magnum Mid cap fund , I would have invested in 34 Top 100 Most Profitable Companies.
- Will a Fund having more profitable companies mean it will perform and give better sustaining returns ?
- How come DSPBR Micro cap fund is performing so well even when it has just 4 Top 100 companies?
- If you suggest that I drop DSPBR Micro cap fund, should I go with the Small Cap or the the Mid Cap fund?
Hi,
I am doing good and trust the same with you too.
1 - Emergency fund : Any specific reason for selecting Gold bonds as one of the savings options??
2 - Life Insurance : Yes, you can change nominee(s) name in future. You may consider opting for basic cover and then can buy a stand-alone Personal accident cover which has disability risk coverage.
http://www.relakhs.com/best-personal-accident-insurance-policies-in-india-details-comparison/
3 - MF Portfolio : Very good questions. But, I believe the fund managers of the funds listed by you are surely one of the best ones in the industry. Sometimes, the small companies may not be very profitable right now but can preform well going forward may be because of their business idea, strategy, industry they are in, good promoters, business opportunities, niche, etc.,
You may kindly go ahead with your funds.
Read:
http://www.relakhs.com/best-mutual-fund-scheme-risk-ratios/
Happy Independence Day Sreekanth,
1. You are right, the Gold Soverign bond will not fall under the Emergency Fund category due to its lock in period. So it's more of a step to diversify my Investment Plan.
2. Life Insurance-
Checked.
3. MF Portfolio-
I have checked the overlaps between Large Cap, Mid Cap , Multicap and Balanced Funds against my choice of Small Caps. I found out that some of these funds are doing really well and have a very small percentage overlap with my current choice of funds. So do I choose them for my next year goals ? Or should I just top up my current funds next year by another 10%, considering that my other set of goals have different timelines from the current goals I'm investing in.
Hope I'm making sense.
Regards
So Sreekanth,
If I top up with same funds, can I change the period of investment for the top up amount, considering that the goals for the top up amount have different timelines as the goals I am investing this year.
Also since I will be investing for goals with more than 15 years timelines, what do I do when both my funds don't perform somewhere down the line considering the volatility of Small Caps. So next year it will mean 18.5 K a month or more than a third of my salary investing just in Small Caps.
Can you please also tell me in that case in which type of circumstances, do I invest in Large caps or Multicaps or Balanced funds?
Thanks again so much.
Hi,
For long-term goals, if the funds in which you have invested in (small cap funds) do not perform well, let's switch to some other small cap schemes only. However, we need to give sufficient time say at least 2 years before making a switch.
Kindly note that it is next to impossible to be with the top performing (in terms of rankings or ratings) funds always. If we are with the consistent performers then its fine.
Hi Sreekanth,
I am back after 2 months of getting my feet dipped in the world of Mutual Funds, SIPs in particular. The market is going up and down and I guess I am slowly getting used to it. And I thank you for getting me to this position.
But hey I am back with a few more questions. Similar to the last one but let me try to do an illustration on this question.
So here goes-
Say I have 1 goal , say retirement after 25 years. I plan to accumulate Rs. 3 crores at the end of 25 years to meet my retirement needs. So I choose to invest in 2 SIPs. Rs. 7500 in FI Smaller Companies Fund and Rs. 7500 in DSPBR Micro Cap Funds. Subsequently every year I top up by 10% ie. Rs. 1500 in these two funds for the next 25 years.
I think I am getting it right till here.
Now coming to my doubts, say I also have Goal no. 2, say building a house after 15 years which will require Rs. 1 crore. Now my first question to you is:
- How do I go about planning for investing for my Goal no.2? Do I increase my top up amount by say 20-25% every year in these same two funds to reach Goal no. 2?
Dear Karikor,
Investing in same funds (SIPs) for multiple long-term goals should be fine and can be managed.
The main differentiating things is SIP amount. Track the SIPs separately and the required corpus amount.
May be my portfolio can give you some idea, kindly read :
http://www.relakhs.com/my-mutual-fund-portfolio-mf-picks/
Thank you for your quick response.
Just a few more things have come to mind -
"The main differentiating things is SIP amount. Track the SIPs separately and the required corpus amount."
So does this mean that I do not top up in the same existing SIP, but rather open a new SIP with the same set of funds?
So my present 7500 DSPBR Mid Cap +7500 FI Smaller Companies Fund for 25 years time period remain the same next year . But I then get another say 2000 DSPBR Mid Cap +2000 FI Smaller Companies Fund SIPs for 15 years to reach my other goal and achieve my required corpus amount after 15 years?
Hi,
No No..
Let's say you have two Goals,
Goal 1 - Two SIPs. MF -1 with SIP of Rs 10,000
MF - 2 with SIP of Rs 5,000
After few years or next year, top up 10%, so SIPs will become MF - 1 is Rs 11,000 & MF -2 is Rs 5,500.
Goal 2 - Two SIPs in same SIPs (but create separate SIPs, can be on diff days just to track) ;
Since goal amount is different your SIP amounts abviously will be different.
So, SIP in MF - 1 for Rs 7,000.
SIP in MF -2 for Rs 8,000.
After few years or next year, top up 5%, so SIPs will become MF - 1 is Rs 7,350 & MF -2 is Rs 8,400.
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