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.
Ashok Kumar, Bangalore, IT, 38: What is the reliable asset class to build a corpus as part of retirement planning?
Monika: I think your question is broader; you want to know how to target retirement. Is that what you are asking?
Monika: So I am going to give you approach; we will talk about products a little later. The goal of retirement planning is really to have incomes from different sources, so you can have income from pension, rent, profit, dividend, interest. The biggest challenge for retirement is getting inflation-proof income, so you must look at building real estate, which will throw off rent 25 years later.
What do you do now? Your provident fund and your PPF (public provident fund) remain your best friends. You are going to look at these products for long-term safe investing. Other financial products linked to equity, direct stocks that you have, if you have the knowledge of equity funds, this is the basket of products that you need to use, and again, just remember, diversification is not just across asset classes but even as a mental tool, when you are looking at different sources of income so that is something that most people realise early on in their lives and leave it too late.
Manisha: So you are saying real estate and equity, ULIPs (unit-linked insurance policies) no.
Monika: No ULIPs, no fixed deposit for retirement, you are hedged in risk free assets through PF and PPF. So more real estate and equity are the only things which will give you inflation-adjusted returns. Ashok: Which option of investment is less risky and beneficial for the consumer? Investing in lump-sum when the market is low or not timing the market and going for SIP? Investment period is five years.
Manisha: Well, you don't time the market, experts don't time the market, nobody can time the market. If it was that easy to really time the market, believe me a lot of people could have done just that; they could have got into the market when it was at the lowest and cashed out when it was at the highest, or close to its highest and really never have to do any real work.
A lot of people make lot of money through equities and it isn't necessarily by timing the market, it's by picking up good value at the right price if you are going directly in stocks. But I think your question is with mutual funds and SIPs. Boring dumb SIP any day and rupee-cost averaging will do the work for you. You don't have to worry, you will not get it right if you try to time the market. If you know the market, if you think markets have come down, they have given up 10-15%, you can bump up a little bit that particular month, top up your SIP, but don't try and time the market.