Mint, Hindustan Times and NDTV, bring you a personal finance show, “Let’s Talk Money”. The weekly call-in show, anchored by Monika Halan, editor, Mint Money, and Manisha Natarajan, editor and senior anchor, special programmes, NDTV, aims to answer viewers’ questions about money-related issues. Here are edited excerpts from the show that aired over the weekend on NDTV Profit and NDTV 24x7.
Karthikeyan Ravikumar, 25, IT executive, Bangalore: I have three questions regarding my financial planning.
1. Currently, we are staying in a rented house. I would like to buy a house. Is it a wise decision, given my financial position? If yes, what should I cut/add in my monthly budget to accommodate the EMI ?
2. Considering that there is going to be a need for gold jewellery for my sister’s marriage, what is the best instrument in gold that I can invest in?
3. I am currently uninsured. What kind of health and life insurance products should I be looking at? What is the best option for my pension planning? Is NPS a good option?
Halan: First question is on the house. I don’t think there is enough money to put down for a house and if you do, it will be really a small house. I think you can wait for four-five years for your career to settle down and build that corpus.
Related to that is a gold question. I understand the sentiment to do the right thing for your sister, her marriage. She is in college. She will start earning. Allow her the responsibility of putting the money together. Your resources right now are small. I would want you to conserve that—which again leads to the insurance questions. You need money to build that insurance shield and the corpus for your house and own emergency corpus. Insurance, you must buy a Rs 50 lakh term cover. Buy for the longest term you can—at this age R50 lakh policy will only cost you Rs 5,000. The larger amount you can buy at this age, the better it is. At the age of 40, this will cost you five-six times more.
In health insurance, you need covers for your mother and sister, and individual policies of Rs 2 lakh each, then later top it up with family floater and I think he does need to start in mutual funds.
Natrajan: What do you see when you see these products promising you highest NAV in unit-linked insurance plans. Most of us would believe that we’d get the highest possible return with zero risk. Nothing comes for free and we need to look at all the products that are guaranteeing NAVs under scanner. Fund manager moves your money between debt and equity to protect your capital. It reduces the returns you would get from a pure equity-linked product. Second, costs of such products are also higher.
Halan: When you think of highest NAV you think of highest equity NAV, at best you will get 5-6%. You are better off in a PPF (public provident fund).
Natrajan: Your MF portfolio is not done well at all. You need to rejig your portfolio to include one large cap name, two multicap outperforming fund and maybe one mid and small-cap fund.