In suggesting how to save for your next car after clearing the loan on the present one, I only outlined a broad strategy without suggesting a specific financial instrument. Now that I have cleared the loan on my Swift, it’s time to adopt my own advice. But I’m not able to arrive at a decision on what financial instrument do I choose? Thought I’d ask for your help.
Here are the specifics.
I’ll be able to set aside anywhere between Rs 5,000 to Rs 10,000 each month. I want to change my car in about 4 years from now (and hence it’s kind of a medium- to long-term goal for me). I plan to buy a car that falls within the accumulated corpus plus the trade-in value of my Swift.
In what financial instrument should I save/invest?
Vinaya- Good to know that you are planning well ahead for a new car. Since you have a capacity for 10k monthly I suggest you consider something for your retirement plan investing like UTI retirement benefit pension fund or templeton india pension plan.
4 years down you will a lot more cars to trade with swift and significantly you salary would have been appraised and bank loan will have changed and you can act accordingly when you actually need to trade your swift.
Correct me if I am wrong!
Still if you want to invest for a new car, I suggest you choose a good Equity Fund like Franklin Blue Chip Fund or Franklin Prima Plus, DSP top 100 or HDFC top 200, ICICI pru dynamic fund as you set 4 years.
One of my financial goals is to pay for my next car with “cash” and hence this question. :-) Instead of opting for a pure-equity fund (and thereby taking on an additional degree of risk), would it be a good idea to opt for a moderate-to-conservative equity fund since my goal is 4 years away?
And thanks for the tip on Templeton India Pension Plan. Will look that up today.
How about HDFC Prudence ? A balanced fund but equity oriented…
Templeton India Pension Plan does not seem to be an impressive fund as per value research
HDFC Prudence does have a great track record and I have researched quite a bit on it. But it’s Debt:Equity is generally around 30:70. Do you think that’s still taking some risk for a goal that’s just 4 years away? Or should I look at funds that have a Debt:Equity in the range of 70:30?
HDFC Prudence is a good fund, consider it. Give a look at DSP Balanced Fund
Rather than Templeton Pension, review UTI Retirement Fund its better than any other fund. Do let me know your thoughts.
How much money do you think is required to purchase 4 years from now? And how much do you think your Swift will be sold for ? I think that should drive your portfolio for this goal.
How about a 2-3 year stint in a balanced fund and then moving to a low risk Bank FD ?
As an experiment, I am trying this bottom-up (no target corpus but setting aside how much ever I can each month and hence the 5k to 10k range mentioned in my question) rather than top-down (a target corpus leading to a fixed amount to be set aside each month). So, I’ll buy whatever I can with the accumulated corpus plus the resale of the Swift.
I like your idea of a 2-3 year stint in a balanced fund and then moving to a low risk bank fixed deposit.
I have a plan to buy my first car. I have started depositing 5000 per month in Recurring Deposits for 1 year, which will fetch me around 60 to 65k, i believe. I do have plans for investing 10k per month from June 2012, which will fetch another 60k, by which i shall pay my initial amount for buying car, and the remaining by loan. Is there any other ways and best plans to assist me.
I’m crazy about cars from the age 10 and i was simply thinking to buy one till my 28th age, without any planning. I’m happy that atleast i have started an initiative.
Please do suggest me with your valuable reply