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Invest in stocks directly only if you can manage them actively

business Updated: Jul 22, 2011 21:45 IST

I am 30-year old and earn around Rs 27 lakh per annum. My rental income is Rs 14,000 per month. I pay Rs 35,522 equated monthly instalment (EMI) for a house and the outstanding due is Rs 28 lakh. I pay EMI of Rs 21,350 for another home loan and the outstanding is Rs 13.3 lakh. The EMI towards car loan is Rs 36,000 and the outstanding is Rs 11.5 lakh. My household expenses are around Rs 80,000 per month. I have mutual fund (MF) investments in HDFC Equity, Franklin Templeton Nifty Index, ICICI Prudential Discovery, Sundaram Select Mid Cap, Birla Sun Life Frontline Equity A. I deposited Rs 60,000 last year in PPF, Rs 50,000 in stocks and Rs 40,000 in MFs. I have a health insurance of Rs 2 lakh for myself and Rs 2 lakh for my wife, besides a floater plan of Rs 5 lakh. I have a traditional policy of Rs 3 lakh and a unit-linked insurance plan (Ulip) of Rs 3 lakh but I stopped paying the premiums after three years. I plan to take a traditional plan for R1 crore. I don’t have any dependents and I am saving for the long-term. In the short-term, I plan to go for a foreign holiday for which I want Rs 3 lakh every year. Is the investment mix alright? — Srikant Das

Overall, you are doing a good job. There are some chinks in the plan. You have acknowledged a few of them and propose to rectify.

Housing loans prima facie appear tax efficient. However, make sure the rate of interest is according to the market rate. There is no harm in checking regularly from your loan provider the rates for new and existing customers.

You have a good mutual funds portfolio. Start systematic investment plans as you already have a monthly cash flow surplus. As far as your asset mix is concerned, you are overweight in real estate and underweight in equity. With no dependents, you can currently consider building an equity portfolio. Hence you can invest in equity funds that you already hold.

Your fixed deposit of Rs 10 lakh looks a little on the higher side. Limit the deposit to Rs 5 lakh and the balance Rs 5 lakh can remain in debt. PPF is the investment you should continue every year. The annual limit is Rs 70,000.

While you have not made a huge investment in direct stocks, you should be continuing the same only if you are actively managing the same.

Your insurance portfolio needs to be aligned. You need to go for a term insurance. As far as your Ulip is concerned, you need to evaluate the value of the policy as there are monthly charges that you are paying to hold the same, which will have an impact on the overall value of the fund. The rationale is to make sure that the fund value does not depreciate further.

The views expressed are of Surya Bhatia, certified financial planner & principal consultant, Asset Managers