It is important to distribute the portfolio in insurance, gold and a long-term bond funds rather than just equities says Radhika Gupta, director of Forefront Capital Management.
She recommends Jeevan Aarogya Scheme of LIC in insurance, HDFC Gold Fund & Goldman Sachs Gold ETF in gold and Reliance Equity, Franklin India Blue Chip fund in equity.
In the midcap segment IDBI Premier Equity is a good option. It is best to stick to term insurance & clean mutual funds because ULIP proves to be very expensive for the investor.
Below is an edited transcript of the interview. Also watch the accompanying video.
Q: The caller can invest Rs 4,000-6,000 per month. How should he allocate the money?
A: His current investments are his SIP in HDFC and ICICI combined with his Rs 5 lakh over the horizon. 20 years of that will easily give him his corpus goal of Rs 50 lakh. What we now recommend is that he takes on medical insurance. He can go to any reputed name whether it is New India or LIC and within Rs 4,000-5,000 premium, he should be able to get a couple of lakh cover with additional benefit. For instance, LIC has a Jeevan Arogya Scheme that would be able to do this. The rest of his portfolio we recommend that he put into instruments that are more conservative. So of that Rs 10,000, a couple of thousand in gold so either in a HDFC Gold Fund or in a Goldman Sachs Gold ETF and the balance in some kind of fixed income or debt instrument so a long term bond fund because his portfolio is quite aggressive right now. As he said, he is physically handicapped so he should make sure it is not just equities.
Q: Investor can invest Rs 10,000 per month. He wants to make Rs 5 lakh in three years, but your comments on other investments as well.
A: He will need to invest more than Rs 10,000, much more. He will need to invest something to the tune of Rs 8,000 - 9,000 in a monthly SIP and if he wants to be very aggressive with his investments then focus on equity investments. In order to meet this Rs 4.5-5 lakh kind of investment in three years I suggest the Reliance Equity SIP. He switches to a better equity fund like a Franklin India Blue Chip Fund and increases the amount of the SIP if he can to be closer to the amount that I indicted. Since his needs are a little bit more aggressive he can also do Rs 1,000-2,000 of the Rs 10,000 in a more midcap scheme like IDFC Premier Equity, which is a very good offering if you want to do SIPs and he can keep the insurance component.
Q: So should he stick with Jeevan Anand or should it have been better a term and more investment in mutual funds of something like that?
A: It is best to take money out of any insurance plus investments. Stick to term insurance and then put the balance money in clean mutual funds. ULIP plans, combined plans tend to be very, very expensive to the investor and often the investment management is not as good as he would have gotten in a plain mutual fund.