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Jul 17, 2012, 06.34 PM IST
In an interview to CNBC-TV18, Hemant Rustagi, CEO, Wiseinvest Advisors answers investors' personal finance queries.
In an interview to CNBC-TV18, Hemant Rustagi, CEO, Wiseinvest Advisors answers investors’ personal finance queries. Rustagi advises that it is wise to start investing early inorder to accumulate a large corpus by retirement. For building retirement corpus, one should invest in well diversified equity oriented fund.
In his opinion, "You can look at two equity funds, one is HDFC TOP 200 which is primarily a large cap oriented fund. It invests around 10-15% in midcap and another one is IDFC Premier Equity which is a midcap fund. You can invest Rs 5000 in HDFC Top 200 and Rs 3000 in IDFC Premier Equity. If you continue this process for next 11 years, you can hope to build a Rs 20 lakh corpus."
Q: An investor can invest Rs 3000 per month. How should he allocate the money?
A: You are in that phase of your life where you need to accumulate as much as possible for your retirement. Ideally, you should have started a little early but, it is never too late. You have said that you want to invest for the next 11 years for retirement corpus say around Rs 3000 per month.
Since you have a time horizon of 11 years, you can look at well diversified equity fund. Since you are in the government job, you will get some pension plus you must be investing every month some money in PF and maybe some money in PPF. Assuming that kind of debt portfolio, you can invest all your money in equity oriented funds.
If I assume an annualized return of 12% from hereon and considering that you continue this process for the next 11 years, you can hope to get a corpus of around Rs 8 lakh which is much less than what you are trying to build up.
Your target is around Rs 20 lakh, for that you need to invest around Rs 8000 per month. It may be difficult for you but you need to try and see because fortunately you are also in a phase where your income will be higher than what you are being earning so far. Try and increase your investment to around Rs 8000.
You can look at two equity funds, one is HDFC TOP 200 which is primarily a large cap oriented fund. It invests around 10-15% in midcap and another one is a IDFC Premier Equity which is a midcap fund. You can invest Rs 5000 in HDFC Top 200 and Rs 3000 in IDFC Premier Equity. If you continue this process for next 11 years, you can hope to build a Rs 20 lakh corpus.
Another area that requires your attention today is that you have said that you have an endowment plan where sum assured is around Rs 8 lakh. Given that your monthly income is Rs 34000 ideally your insurance cover should be 10 times of your annual income. So, I think there is a gap, try and see if you can buy term plan which will take care of your risk cover also.
Q: An investor can invest Rs 2,000 a month for the next five years. Where should she put her money in?
A: If the time horizon is five years and the money has to be invested every month, she can look at maybe equity oriented hybrid funds or pure large cap equity kind of funds. But as she has mentioned that her objective is to plan for retirement obviously there is a mismatch somewhere.
But assuming this five year time horizon, she can look at such funds. Some of the funds that she can consider is HDFC Balance Fund in the equity oriented balance fund space and Canada Robeco Balance Fund. On the large cap space, she can consider a fund like DSP Blackrock Top 100 .
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