MONEY MATTERS
Managing your money can be tricky. Send your queries, and top- notch industry leaders will help you resolve any issue.
Financial Planning
Kanouj Das: I am 26 and currently working as an assistant in an insurance company. I have completed nearly two years in this job. My gross salary is ` 24,000, take-home amount is ` 20,000, and I will retire in 2052. How should I invest and save so that I can buy a car after two years and also travel abroad? My current liabilities amount to ` 10,000.
Ashish Shanker, Head, Investment Advisory, Motilal Oswal Private Wealth Management, replies:
Your immediate goal is to buy a car and travel abroad. You can prioritise your goals further and think of buying a house at this stage as it is an appreciating asset. If you want to buy a car, a loan can be availed (with about 20 per cent selffunding through SIPs). Your travelling expenses can be met from regular savings and also from annual incentives, if any. It will also help avoid frugal spending of one’s surplus salary.
For long- term investments, a total SIP of ` 10,000 every month ( surplus salary) in a diversified basket of t hree to five mutual funds ( equity 75 per cent and debt 25 per cent) is expected to generate a corpus of ` 4.5- 5 crore by the time of retirement. As and when you get a salary hike, the SIP amount can go up accordingly, thereby increasing the potential corpus generated over the long run. In the equity space, we recommend Kotak Select Focus Fund, Aditya Birla Sun Life Top 100 Fund, Motilal Oswal MOSt Focused Multicap 35 Fund and HDFC Balanced Fund. In the debt space, we recommend short-term funds where most of the income comes from an underlying coupon of the bonds and not market movements. One can opt for Aditya Birla Sun Life Short Term Fund and Franklin India Short Term Income Plan.
Real Estate/Loan
Aalka Banerjee: I took a home loan of ` 50 lakh five years ago. Now I want a larger amount for home improvement. I have already made a pre-payment of ` 15 lakh. Should I take a top-up loan or go for a loan against property?
Harshil Mehta, Joint Managing Director and CEO, DHFL, replies:
A financial institution or a housing finance company will be able to extend a top-up on your existing home loan depending on the market value of the property and customer eligibility. One can get a loan of up to 100 per cent of the improvement cost estimates as certified by an engineer/architect and duly verified by a technical officer. The maximum limit is 90 per cent of the overall market value of the property on a loan amount up to ` 30 lakh (you get whichever is lower). One can also increase the loan amount by including an earning co-applicant.
Mutual Fund
Surabh Shukla: Infrastructure funds have delivered close to 40 per cent returns in 2017. Given the government’s focus on infrastructure, how are these funds likely to perform? Should one invest now?
Vidya Bala, Head of Mutual Fund Research, FundsIndia, replies:
Sector funds need some time to deliver. And the ideal time to enter this space is when the sector is not doing well. Entering sector funds based on high past returns could put your investment into timing risk. While the infrastructure sector has been picking up, it remains highly cyclical and may go through down phases. Unless an investor knows when to exit, it can be a risky affair. Holding a diversified fund, which includes selective infrastructure stocks based on the sector’s prospects, should be a prudent approach to long- term equity investing.
Health Insurance
Harish Kumar Singh: One of my friends has recently come to know that he is HIV positive. Although he is in good health right now and getting treated in a government hospital, he wants to buy a health insurance policy. Please suggest if there is any good health insurance policy for the same?
Unfortunately, there are not many options available in this case. Health insurance mainly covers unknown risks, and most companies do not provide health insurance to people who have HIV/AIDS except the Medi-classic plan from Star Health Insurance. But the policy is only issued if the CD4 count is 350 at the time of purchase.