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.
Kush Kochgaway, 36, software engineer, New Delhi: How much of term insurance should I have so that my family is secure if something happens to me?... (What should be my) Strategy to do away with liabilities like home loans?
Halan: We will deal with this life insurance question first. It may make sense for you to buy two policies — 75 to replace if you were to change jobs and 50 to cover the loan, so at some point loan gets over and you prepay it. Your asset build-up should be enough so that you don’t need some life insurance. Leverage your money... he has got a very good stock portfolio again, for people like you we will not recommend funds and if you want to prepay your loan, then you can milk your portfolio and then prepay in bits. But I think you should just continue with the loan, as it gives you tax breaks also.
Natarajan: There is no point in prepaying the loan. You are getting it at a very reasonable rate, and looking at the inflation as of date, you are in sort of a negative real interest rate scenario. I did take a look at your stock portfolio. There are two very good stocks and winners actually. It’s a large-cap portfolio, NHPC and Jai Prakash Associates are going to be very long stories... So if you are planning to wait out, there is a opportunity cost in waiting for the stocks, which are not moving. Also, you do have a little bit in mutual funds and if you are looking for a bit more then go for an aggressive mid-cap to small-cap fund. Then you would be able to balance your stock portfolio.
Asher Wesley, 23, software engineer, Coimbatore: I have recently bought a property for R13 lakh through loan. I have to pay an EMI of R15,000. I have leased my property for R5 lakh for a period of two years. How should I maximise my returns per month so that i can pay the EMI by investing R5 lakh.
Natarajan: Your capital of R5 lakh is too low to look at a monthly return product. The monthly yields even in a monthly income plan mutual fund will be not more than 6%, or R2,500 a month. To try and match your returns from the R5 lakh corpus to your EMI of R15,000 a month is unrealistic... If you want to protect your capital with zero risk... your choice for a two-year investment is limited to a bank FD. A little more risky but with more effective post-tax returns are FMPs, or fixed maturity plans from fund houses. Problem is, as retail investor we have very little information on when these FMPs hit the market.
Halan: These unrealistic expectation will lead you to investments which are very risky. If it would have been possible, everybody must be doing it.