A bit of fresh investment in equity, rest in debt: Roongta

Below is an edited transcript of the analysis on CNBC-TV18. Also watch the accompanying video. 

Q: This investor wants to invest Rs 40,000 per month over 14-15 years to create a nest of Rs 2 crore for his daughters' marriage. What do you suggest?

A: It is good that you bought term insurance, but I think your needs are probably higher. With your current income, I think you need a slightly higher insurance policy and with the premiums having dropped dramatically, it might be good for you to apply online for a new policy about a month before the current policy's renewal. There are plenty available such as HDFC Clik2Protect and Aviva.

You could choose one that suits you and is available in your city. If you make complete disclosures, you will be able to get a higher sum assured at a lower premium. That's as far as the term insurance is concerned.

You have a lot of good tax-saving funds and once the lock-in period is over, you might consider shifting them to better-yielding equity funds over the long run. Your new investment of about Rs 10,000 could be spread 90% in equity and maybe 10% in gold.

To invest in gold, the SBI Gold Fund is the best bet. As far as equity is concerned, you could  consider Franklin Blue Chip, ICICI Pru Discovery, Birla Dividend Yield Fund or Reliance Equity Opportunities and invest in just two. You already have too many funds and need a lot of review. The amount of Rs 40,000 should not be invested in more than four or five funds.

Q: This investor says he can invest Rs 5,000 a month and wants to know how to allocate the money. In three years, he wants a kitty of Rs 5 lakh, some of which he will use for his daughter's marriage. He has an insurance policy in HDFC Young Star Plan in which he pays Rs 60,000 premium for an assured sum of Rs 15 lakh. His current investments are in HDFC Top 200, HDFC Equity, HDFC Mid Cap, ICICI Blue Chip, ICICI Infrastructure and DSP Tiger Fund. What's your advice?

A: Since the time period for fresh investments is three years, you can only take a dash of equity exposure. The rest of the money should primarily be in debt via instruments called Monthly Income Plans. These are essentially a mix of 80-85% debt and 15-20% equity. Since he is a HDFC fan, he can look at the HDFC Multiple Yield Fund.

As far as his existing ULIP is concerned, he has already paid the charges. I think he has been on this scheme for some time. The fund, after deducting the charges, has not done too badly when compared with the benchmark Nifty.

So it is in his own interest to continue investing in those funds so that he can take the benefit of better returns and the lower charges going forward. Obviously, he is underinsured and so for the balance amount he should clearly look at term plans.

Q: Does he need to wind up any of the mutual funds?

A: I think they are all themed on infrastructure and needs to diversified. He can keep the fund house, but change the scheme.The ICICI Infrastructure fund could be probably shifted to ICICI Pru Discovery and the DSP BlackRock Tiger fund could probably shifted to DSP BlackRock Top 100.