Reading through my backlog of emails, here’s what I found: Why would I ever want to break my ultra-safe Fixed Deposit(s) that currently earn a handsome 9% — 10% per annum and instead invest my money in something that’s much much riskier (AA-!) and only assures me up to 12.50% per annum? The risk premium […]
From Value Research (emphasis mine): Unfortunately, a proportion of investors seem to have the expectation that an SIP is a sort of a magical device that can protect them from all losses. It’s not. An SIP means that you keep investing though the ups and downs of the markets, ensuring that at least part of […]
Diversification is the other panacea commonly suggested in leading personal finance publications. Too many “experts” take the concept of diversification too much to heart (in my opinion, it’s all a result of high-fee business education). For example, in a recent issue of Mutual Fund Insight, the “experts” often asked “Why the reader had chosen to […]
Consider this chart: This chart represents the ratio of my saving/investment in one particular financial instrument to my total income each month. On an average, approximately 15% of my total income each month is saved/invested in this one financial instrument. What’s worse though is the fact that I am locked into doing this for the […]
My mutual fund investing strategy is anything but systematic. While I do know how much money I want to set aside each month for investing in mutual funds (across various financial goals), I don’t follow the common Systematic Investment Plan (SIP) strategy (I used to do that at one point in time by investing on […]
Mithun asks, My mom will soon be receiving a lumpsum (around Rs 300,000). How do I invest this lumpsum in her name in order to generate some monthly income? I’ve heard about Monthly Income Plans (MIP). Are they a good option? Yes. Monthly Income Plans are the way to go — but I’d recommend that […]
A reader asks, I work for a multinational and my wife works for the Government. We normally use my salary for day to day expenses while my wife’s salary remains almost untouched. Where can we save/invest her income while keeping our peace of mind (not keen on the equity markets). Here’s what I read from […]
Here’s what I suggest. Ignore all those complicated analysis (an example) of yields and returns and comparisons with other fixed-return financial products. Buy these bonds if and only if: Your objective is to lower your income tax, and You fall in one of the highlighted cells below. In such a case, opt for the Series […]
When you plan your investment portfolio, it’s a good idea to choose those financial instruments that do not require you to make mandatory investments each month. With this strategy, you gain financial flexibility i.e. you can invest whatever amount you can into your investment portfolio at that point in time. For example: Suppose you choose […]
A reader asks, I need to purchase gold ornaments for a family event that’s about twelve to fifteen months away. What’s the best way to go about saving for this goal? I can set aside a certain amount each month from my salary. The question had me stumped since I’ve never saved/invested specifically with the […]
S asks, Suppose you have a loan that you desperately want to close. Is it worth dipping into your emergency fund for this purpose? I can find convincing arguments on both sides. If you take this step, you get an immediate return on your investment (equal to the interest rate on the loan) but you […]
A reader asks, I have an emergency fund that doubles up as a buffer for unforeseen expenses and for the pink slip. I currently have three-months’ worth of expenses in this fund which is lying as a cash balance in my savings account. How can I structure this fund in order to earn a better […]
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 […]
If you have Rs 20,000 to invest each month towards building a retirement corpus, how does this portfolio sound for a retirement that’s twenty years away? Rs 10,000 in HDFC Top 200 Fund (Growth) Rs 5,000 in HDFC Prudence Fund (Growth) Rs 5,000 in HDFC Monthly Income Plan Long Term Plan (Growth) What changes would […]
When I consolidated my finances and started my investments in mutual funds, I opted for a Systematic Investment Plan (SIP) but the SIP-debits came from a lumpsum that I already had in my savings account. I think a better option would have been to park the lumpsum in a Systematic Transfer Plan (STP) and from […]
A colleague asked, I want to set aside an emergency fund purely to handle any loss of employment situation that I might face. What would you recommend? Here’s what I recommend: First, estimate your monthly expenses (including EMIs, monthly savings for annual expenses, and routine household expenses). Let’s say this amount is M. Structure a […]
A friend asked, I’m in the midst of changing jobs and have opted to withdraw the savings in my Employee Provident Fund. It’s a decent sum — around Rs 300,000 — and I wish to keep this money safe. Is there a way I can achieve this and yet earn a steady income? My immediate […]
Approximately 70 to 30 — when most literature suggests the exact opposite. But that’s what my financial goals demand and financial goals are how you ought to arrive at your own debt to equity investment ratio.
A reader asks, I’m being offered an upfront joining bonus by my new employer. How should I go about investing this money? There is one condition though. I will be required to give back this money if I leave the job within 6 months. Given the payback condition, I’d recommend that the joining bonus be […]
What do you think of this strategy for buying your next car? I won’t get a chance to try this out at least until I close the loan on my present car. [sniplet tip tuesdays]