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ot a question about your money? What you should or should not do with it? Our expert Uma Shashikant has the answers.
I am 18 years old and I live abroad with my parents. We are returning to India this year. My dad is 42 and my mom is 40.
While we own an apartment in India, we don't have much of a bank balance.
My dad will be returning with around Rs 20 lakh (Rs 2 million). Can you offer us some investment advice?
Arun Parekh
I presume your dad will work when he returns to India for at least another 10-15 years. He will then have an income stream to take care of your family's regular needs.
If you are thinking of pursuing a professional education in India, it could be expensive. You may have to take an educational loan.
At your parents' age, retirement planning must take priority. I would advise them to invest the Rs 20 lakh instead of drawing out of it. It is important for them to work towards making this investment grow since they need a decent amount for retirement.
Insurance could be costly, but still worthwhile. They can consider investing about 50% of their money in a pension plan that provides them with an annuity. Most insurance companies have such a product, and you can speak to an advisor about the options.
Of remaining Rs 10 lakh (Rs 1 million), about Rs 6 lakh can be invested in a hybrid product like a balance fund (a mutual fund that invests in equity and debt) until their finances have stabilised.
The balance Rs 4 lakh can be placed in deposits to meet any contingency.
They should focus on growing their corpus over the next 10-15 years and add to it as far as possible.
Family: A wife and 18-month daughter
Gross income: Rs 400,000 per annum
Investments: NSC (Rs 60,000), Prudential ICICI [Get Quote] Life Time (Rs 18,000 per annum), Prudential ICICI Pension Plan (Rs 10,000 per annum), IDBI bonds (Rs 10,000).
I have a car loan (Rs 3,526 per month till December 2007) and credit card repayments of Rs 2,000 per month.
I have Rs 50,000 in cash right now. How should I plan my investments?
Kallol Mukherjee
You should consider a child care plan for your daughter. Choose a plan with a higher equity component. Invest regularly and don't take out the dividends. Ensure the money grows. In 18 years, when she needs the money, it would have grown into a large sum.
It is important that at least three months' income is kept handy and available for emergencies. If you do not have any deposits, turn the Rs 50,000 into a bank deposit.
If you have already taken care of that, then you should begin to invest in equity in the interest of long-term growth for your retirement plan. Consider a systematic investment plan in a tax saving equity plan.
Focus on building an equity portfolio, using mutual funds to balance the debt portfolio you already have. Consider PPF, because the interest is exempt. For NSC and infrastructure bonds, the interest is taxable.
Income: Rs 2,40,000 per annum
Investments: Two money back policies (premium of Rs 7,000 and Rs 4,000 per annum) and life insurance with premium of Rs 15,000 per annum.
I have a home loan EMI of Rs 9,300 and credit card debts close to Rs 90,000. I want to clear this debt by August.
Kesavan
There is no way in which you can generate an investment return that is higher than your credit card or personal loan's rates of interest, unless you indulge in speculation, which is very risky.
The best option is to simply begin to pay off the debts regularly and free yourself. At your level of earnings, your debt is high, so focus on getting debt free first. Then you will be able to create your investment portfolio.
I am single, in my late 20s and working in the Middle East.
After setting aside money for my family and insurance policy, and repaying a vehicle loan of Rs 12,000, I still have Rs 45,000 to spare each month.
Should I prepay my loan? Should I invest in property or mutual funds?
I do not like long term commitments since I am afraid that, should something happen to my present position in the firm, I would go bankrupt, at least for a while.
Santhosh KuruvillaIt is good to clear off debt, unless it is low cost and concessional. Pay off the vehicle loan first.
If your objective is to ensure you have protection money first -- that is money needed to support yourself if you were not earning for, say, 3-6 months -- estimate that sum and create a buffer.
You can use NRI deposits that are tax-free to achieve this objective. Talk to your bank to get a deposit account opened.
After you have created a buffer of about one month's salary, begin to put aside about 10% in an equity mutual fund. Increase it gradually so that by the time you have created the buffer you already have an equity investment, into which you will be able to add more of your savings.
Property is a good investment, as long as you have staying power and the attitude to sell when needed. The paperwork can be daunting, particularly for a NRI, and buying and selling may not be fast and at market rates for a one off transaction like yours.
If you worry about the risk of not having a job, you will have your money locked in and might have to distress sell. I would not advise property until you have created an adequate buffer for yourself.
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