Vetapalem Sridhar says, Hi Friends!!! "Risk comes from not knowing what you're doing."  Warren Buffet. A clear focus/strategy with discipline and patience would open the doors to the world of gud returns that lay ahead. Welcome to the session on investing and financial planning.

Ravi asked, I want to invest in LIC [Get Quote] Amolya Jeevan , which is a term plan.Is there any tax benefits in investing in this term plan as other moneyback and endowment policies

Vetapalem Sridhar answers, Dear Ravi, the amt invested into insurance schemes including TERM Plan would qualify for tax benefit within the overall 1L limit u/s 80C.

Kunal asked, Hi, Sridhar. In today's mkt as all the mutual funds are giving negative or low returns can you name some good mutual funds to start investing in? I hav SIP in Reliance [Get Quote] RSF, DWS Investment Opp, JM Emerging, MAgnum COMMA,Sundaram select focus. Can I continue with these?.or should I buy gold instead? For tax planning Can u suggest some good funds in todays mkt or can I go for NSC, KVP. Thank You.

Vetapalem Sridhar answers, Hi Kunal,ur portf is aggressive in nature and hence would be more volatile. Make further investments into 2 large cap/diversified funds like HDFC [Get Quote] Growth, Reliance Vision, Franklin Bluechip etc to bring more stability to the portf. Selling when mkts r down is not a gud option. Over the next 2-3 yrs it does make sense to trim 2 aggressive funds to ensure that the number of funds is manageable. NSC/KVP r not options. Amt of gold that u should own would depend on an overall asset allocation need.

jayan asked, Sir, I have the following mutual funds, through SIP route. DSMPL Equity(G) Rs. 6000, DSPML Tiger Rs. 2000, SBI [Get Quote] Magnum Rs. 1500. I would like to add one more funds to my portfolio. Could you please suggest a best one?. I have invested in the above funds for my future requirements say after 10-12 yrs. Thanks.

Vetapalem Sridhar answers, It is not possible to know which fund will be the best performer in the future. U should look at adding a fund like Reliance Vision, HDFC Growth, Sundaram Select Focus, etc to ur portf. Continue to invest with discipline for the next 10-12 yrs...

venkat asked, some experts says inflation will reach 20%. is it possible?

Vetapalem Sridhar answers, Though such a high inflation is possible, given the scenario and the strength in our economy, it is HIGHLY UNLIKELY over the foreseeable future. A high Inflation may be a reality for an extended period of time (from a few mths to around an yr, difficult to say). Oil is going to be one of the primary factors that would govern inflation. In such situations mkts do go thro a bad phase, which is not necessarily a bad thing for long term investors, as it gives excellent opportunities to buy gr8 companies as relatively cheap prices. So dont worry much about inflation, but be focussed on investing with discipline.

farook asked, Sir,which scheme invest the money, related inflation above 11.25% i should invest in short and longtime plese tell ?

Vetapalem Sridhar answers, Dear Farook, currently I dont think that there is any relatively safe debt options available, which are giving positive returns post inflation. Tough in ur debt holdings a mix of short term FDs and short term Floating Rate funds should be options to consider. With the current RBI actions, we should soon see banks raising FD rates. A suitable Asset Allocation is hence critical to ensure that in the long run u make adequate positive returns post inflation. Plz read thro the following link which discusses this in detail: Asset Allocation - Secret to Financial Freedom

Kiran asked, Sir, Can you suggest me few Mutual funds. I can invest 15000 per month atleast for next 3 years and can stay invested for long term. I have selected Sundaram Tax saver(1000rs), SBI MTGS(1000rs), HDFC growth(4000rs), TATA infrastructure(4000rs), SBI Contra(5000). I may also plan for 5000rs more for ICICI [Get Quote] Pru FMCG(2000rs) and Rel.Div.Power(3000rs). Please suggest me. My plan is for investment purpose only and not for Tax saving as the bracket is already occupied with other things. For this investment I can take risk. Thanks

Vetapalem Sridhar answers, Hi Kiran, there r a lot of sector/thematic funds picked by u. It may not be wise to invest into such funds unless u r really an expert at the sector as the risk is higher. Of the funds u have picked Sundaram, HDFC and Contra r gud funds. U can probably look at one more large cap (Principal Growth, Franklin Bluechip, Reliance vision ) and one aggressive diversified fund (JM Emerging Leaders Fund, SBI Midcap etc) to complete ur portf.

sakuntala asked, I am a new entrant in the stock market. I am not a speculator..but want to start with small no of stocks and want to be a long time investor. with which sector stocks shall I start my stock investment?

Vetapalem Sridhar answers, One way to do this is to first look at the stocks that comprise the Sensex or Nifty. They contain the best companies in India. U first start investing by picking 5-8 stocks from among these options. Ensure that each company operates in separate field and that their businesses are not correlated. Invest in these companies with a 10-15 yrs horizon. Continuously read up on these companies so that over time u understand about them. Once u start this way over time with experience and dedicate effort towards learning investing u should be able to build skills related to investing.

hugo asked, inflation in double figures, high oil prices, share market at its very low and continuing to get more and more fragile. lending rates are getting higher.....no comfort what so ever in real estate where prices are soaring without any connection with the ground reality.....in such a disasterous situation what do you suggest, where should the middle class, upper middle class like us have to put there money in. what are predictions about all the above issues.

Vetapalem Sridhar answers, Hi Hugo! It is time for a reality check. Due to easy availability of money and higher salaries a lot of individuals were not being very careful with their money. Such times do ground us and we should not miss the opportunity to learn by just focusing on the negatives. Such times teach us to appreciate the value of our hard earned money. It makes us think about the habits that we need to change when it comes to managing our money. A gud asset allocation plan would go a long way in ensuring that over time u make reasonable returns to meet ur objectives in life. It is a fact that gud times and bad times do not last forever. Hence, the long term money should be invested with discipline into equity MFs with a 5-7 yrs horizon.

KK asked, GA, Shridhar, Plz help me, My side PF contribution is Rs.48000 per year. That means I have to invest Rs. 52000 in tax saving schemes so as to fulfil the Rs. 1 lac limit of 80C. Is it right. Does company side PF contribution comes under 80C? Please answer. Plz. Plz. Plz........

Vetapalem Sridhar answers, Yes that is right. I would suggest that u invest the 52K into a ELSS Mutual Fund with a 5-7 yrs horizon where it would qualify for the tax benefit u/s 80C. U can look at a fund like Sundaram Tax Saver, Principal Tax Savings Fund, HDFC Tax Saver etc

Menon asked, Is this the right time to purchase a flat in Pune?

Vetapalem Sridhar answers, Hi, Interest Rates r bound to go up. Real Estate side has not yet seen any meaningful correction based on various factors. It is just a matter of time before a correction is seen in the real estate market. Though it is not possible to know how much and when would the correction happen, the current direction is evident. Would suggest that it would make sense to postpone any real estate decision by a few mths.

brij asked, sir since inflation reached up to 11%.so at this stage if i don't want to take any risk so wahat is batter option for investments . should i keep my money in saving account or do the fd . plz suggest and i think this is very common problem .

Vetapalem Sridhar answers, Even in FDs a short term FD is more appropriate as deposit rates should see some rise in the near future. Having said that I would strongly suggest that if u can invest money with a 5-7 yrs horizon, then start a SIP in a diversified Mutual Fund as over this tenure u can expect around 15% annualised returns, which would be way above the inflation rate. Remember, if u invest in current mkts u would be BUYING equities at LOWER Prices. Just a couple of mths ago a lot of investors were willing to buy equities at 21000 level of the SENSEX with a 5 yrs horizon. If they remain invested for the said tenure they would still make reasonable return. So if u invest at current 14K level of mkts u would make a much higher return.

ra asked, is this the right time to enter stock market if i have a year long horizon?

Vetapalem Sridhar answers, NO, NO and NO. Equities is an investment option which over a long run will definitely give u reasonable returns... Plz read thro the following link to understand that why in the short run there is risk and in the long run equities would deliver higher returns. Stocks -- long term investing.

john asked, My equity portfolio value has come down by 30 per cent. Is it advisable to shift to debt now or wait till the market picks upto what level. And also which debt instruments you suggest for investment.Thanks

Vetapalem Sridhar answers, Hi John, there is a beautiful concept called as asset allocation. EXAMPLE: Let us say that u plan to maintain 50:50 in debt and equity (the allocation is not recommended here, it would depend on individual circumstances). So when equity corrects by 30%, then the proportion of debt increases in ur portf (35:50). So u get back the allocation to the predecided trgt of 50:50. To get this u would have to sell some debt and buy more equity to end up with [42.5:42.5]. So asset allocation forces u to BUY LOW and SELL HIGH. U plan to do the opposite. When investing any money into equities the reason that u should have a 5-7 yrs horizon is, that when such falls happen in mkt, u can hold onto ur investments till the mkts recover and u make a reasonable return. HAVE 5 YRS ALREADY PASSED THAT U R CONSIDERING TO SELL UR EQUITY INVESTMENTS?

Ria asked, Good afternoon sir....I am a working woman. It has been 1 year since I started my job. My monthly salary comes near Rs. 30000, after paying an LIC premium of Rs. 20000 annually and meeting family expenses I am left with Rs. 5000-6000 monthly savings. I dont know where to invest money. Could you suggest some good Mutual Funds or other avenues where I could invest. Which could give me tax benefit. Please suggest something.

Vetapalem Sridhar answers, Hi Ria, Invest money into a ELSS MF where u will get a tax benefit. But invest with a minimum of 5-7 yrs horizon. I think a SIP (mthly installment) of the amt that is comfortable should be done. U can look at options like HDFC Taxsaver, Sundaram Tax Saver etc... If u want to invest in a fund with no tax benefit then u can look at options like Reliance Vision, HDFC Growth, Sundarm Select Focus, Principal Growth, etc....

Rajanshah asked, Hi, I have mutual funds investment in following . Is it a good Mix ? Can you suggest any change ? Please let me know. 1) DWS alpha equity - 80000 2) DSP ML Top 100 - 80000 3) Reliance regular savings fund - 80000 4) Standard chartered premier equity - 50000 5) Reliance growth - 50000 6) Kotak investment opportunity - 60000 Thanks a lot for your answer Rajan

Vetapalem Sridhar answers, Dear Rajan, I think that u have a reasonably gud portf but with a aggressive bent. Ur portf maybe more volatile in nature, but if u have a 5-7 yrs horizon u can continue to hold onto the funds. If 1 yr is over u can look at switching one reliance fund into Reliance Vision to bring a little more stability.

Manvendra asked, Hello Sir, Currently I am investing in Franklin India Flexi Cap(G), ICICI Pru Service Industries Fund(G),SBI Magnum TaxGain(G) since August 2007 on a monthy sip of 1000 rs. for 5 years. Please tell whether i have selected good funds. Also I want to invest Rs 2000 more. Kindly advice me what funds should I select.

Vetapalem Sridhar answers, HI Manvendra, u do not have a strong core portf. U can look at adding SIP into 2 funds from among Sundarm Select Focus, Relaince Vision, HDFC Growth, Principal Growth, etc....These should help add stability to ur portf.

KKP asked, I WANT TO MAKE INVESTMENT FOR MY SON'S EDUCATION WHICH PLAN IS THE BEST. FOR NEXT 15 YRS

Vetapalem Sridhar answers, A simple SIP into a diversified equity MF would be the most ideal way to build funds for ur child's future. Also do get urself an ADEQUATE TERM INSURANCE Cover. U can look at options like SBI Shield, ICICI Pru Lifeguard WROP, Reliance Term Plan, etc.. Would recommend that u read thro the following link to understand in detail WHY: Investing for children, A Slide Show, click NEXT to read thro.

remo asked, Sir !! I am 43yrs old now and i hv a liability of 11.40 lacs for homeloan. I am expected a lumpsum nearby, can i pay lumpsum amount 2 lessen my burden the liablity or wait?

Vetapalem Sridhar answers, Hi Remo, it would depend on ur overall situation, especially ur cash flows and ur attitude towards money. This is wat I would ideally recommend. U should hv a financial plan in place which decides how much u r going to invest each year. So first u should meet this trgt. Over and above this if are left with additional savings then u can consider to prepay the housing loan.

verplex asked, Where is the Indian stock market heading?

Vetapalem Sridhar answers, No one knows for sure. It is expected to be a rocky ride (expect there to be high volatility over the next few mths to a year). And it is not possible to say with certainty how much more it will correct and how long will it be before it goes up. But this is for certain, if u have a 5-7 yrs horizon, these r gr8 times to buy into equities. Another ideal way to invest into equities in such volatile times is the SIP route. Over the next 3-5 yrs we can expect the mkts to cover lost ground and probably reach new highs.

hari asked, i am staying away from the market the way it is tanking. Inflation is anothe fundamental force that will dampen the growth rate. Pl give me one good reason why i should stay invested :)

Vetapalem Sridhar answers, Dear Hari, if u sell now (assuming that u have bought at higher levels - we need to ask why u bought when mkts were high in the first place) ur notional loss will be converted into a REAL Loss. U will wait till things become better, by which time the mkts would have reached it previous highs. Seeing that u will again invest at higher levels. So instead of selling now, i.e. when mkts are LOW and then buying again when mkts r HIGH, does it not make sense to just remain invested.

Prem asked, Hi Sir, Why normaly the salried people opts for SIP than for a lumpsum money, even if they have the funds. is there any particular reason for this?. In the current market conditions in long run will the MFs will do any benifit?.Pleae advise

Vetapalem Sridhar answers, Hi Prem, the reason is that they can save relatively smaller amts each mth which gets spent it they do not block it somewhere. A SIP ensures that investment happens with discipline. If u have funds u can by all means go and invest it as a lumpsum in a Mutual Fund, but with a 5-7 yrs horizon. In 5-7 yrs u can expect an annualised return of around 15-20%...It is for u to decide if this is beneficial or no.

RK asked, I have 2 questions here. 1) If I wanted to invest in Insurance plans... what do u suggest traditional insurance plans OR Unit linked insurance plans. What are the best plans available as per your knowledge ? 2. Please advise which are the best Retirement schemes ? My Present age is 32 Yrs. Thanks in advance.

Vetapalem Sridhar answers, 1. A pure risk cover i.e. a TERM Insurance would be the best option to cover risk. For the sake of investment a Mutual Fund should be more ideal. 2. If u r referring to Pension Plans offered by insurance companies then this is my view. Existing Pension products r highly inflexible. Although it ensures discipline (the problem which most people face), there r better alternatives available thro which u can create more wealth in the long run. If invested with discipline Equity oriented MFs would be a superior alternative to create wealth over the long term.

dharmesh asked, Sir, George Soros says that we are in the midst of the worst financial crisis in last sixty years. Is India getting affected fro the worst in near term future?

Vetapalem Sridhar answers, In the world, Indian Economy is one of the strongest. In the short term we too would get affected, but to a lesser extent. But there are a number of long term factors that would eventually ensure that India resumes its high growth path. One among them is its demographics - a younger population in India. The number of people that would be in the working age group will increase substantially. Hence there is an extremely strong internal consumption story that is still intact. Currently for most global investors India exposure is an insignificant part as far as their investing is concerned. But u will experience over time that there will be tremendous interest in Indian Equities.

jagdishbhai asked, If I buy mutual funds through my bank or broker I get charged 2.5% entry load. How to buy mutual funds directly so I dont have to pay the entry load?

Vetapalem Sridhar answers, U have to fill up the application and go directly to the Mutual Fund office and submit it or alternatively submit it at the office of the registrar to the Mutual Fund. Also enquire if the Fund has an online facility. If it does u can register for this facility and can do all future transactions online using net banking without the need to actually visit the MF office.

premin78 asked, Sir, I have sips in rel dv power,dspml TIGER, kotak 30g.,idfc premier equity,franklin india bluechip,icici pru infra g.What is ur view on my portfolio?

Vetapalem Sridhar answers, U have too many thematic/sector funds. Would suggest that u do not add any more investments into these funds. Continue investing into the diversified funds that u own (kotak, idfc, franklin). In future u can trim the sector funds and add diversified funds in their place. Selling now is not advisable as mkts r down.

pmh asked, Hi, I have ongoing SIP's for "Reliance Growth ", Magnum Global , HDFC equity, Fidelity India Special Situations, Franlin India Flexi Cap, Sundaram BNP Select Focus & DSPML Equity. Each of my SIP is between 3000 to 5000. Please review my portfolio and suggest if it is appropriate? My investment plan if for 5-10 Years horizon. My objective is to generate 15-20% annual return ?

Vetapalem Sridhar answers, Ur portf is Ok. U should look at trimming one of the midcap funds that u hold over time. Continue with the rest of the funds. U should meet ur genuine expectations.

PChidambaram asked, HELLO SIR, i JUST HAVE A SMALL QUESTION TO ASK, hOW THE INFLATION IS GOING TO EFFECT REAL ESTATE MARKET. RECENTLY I PURCHASED A FLAT AS AN INVESTMENT BUT NOW I AM NOT SURE WHETHER I MADE A RIGHT DECISION. PLEASE REPLY...THANKS

Vetapalem Sridhar answers, Whether the decision u have taken is Ok or not depends on a lot of factors, individual specific and the property specific. If u can remain invested into the property with a 5 yrs horizon u should be able to get a return on ur investment. Ur holding capacity depends on ur ability to pay EMI (if u have taken a loan) or ur liquidity situation (when do u need the money back). However in the short to medium term a correction is expected.

Shyam asked, Hi Sridhar, I am an NRI and want to utilise the inflation currently in india. Can you suggest what are the best methods of investment in this period?

Vetapalem Sridhar answers, High inflation leads to a negative sentiment in the economy. It is also generally accompanied by gud corrections in the mkts. So prices of stocks tend to go down more than their fair value. So there will be a lot of gud investment opportunities that will emerge in equities to invest with a 5-7 yrs horizon.

Vetapalem Sridhar says, Thats all for now friends! I am aware that I am not able to answer a lot of questions, but if u read thro all the answers, most of u would find the answer to the questions you have asked.

Vetapalem Sridhar is a financial planning specialist based in Pune. He can be reached at vetapalems@rediffmail.com.