Where should I make investments?

[alekhkhanna]

Hey guys,
So the thing is even though I've been working for a bit more than a couple of years now, I was never into savings. Recently our family was hit with some unseen expenditures and I got thinking about it, but have rather poor knowledge of any investment.
My aims are to invest both short and long term. The only "investment" per se I've is a life insurance policy. Nothing else. Also shifting to a new job, so would love to plan my finances and invest smart.
Been reading JagoInvestor for some hours since today morning and AFA I understood, MFs, the Equity Diversified type are good for long term. Among the short term, I really don't know. I am thinking of getting the Sweep-in/out facility activated for my salary account (where money over a threshold value is automatically turned into FDs with higher interests). But then, what else ? How should I go about my financial planning ?
10% of my salary will go as house rent.
For the rest, I'm thinking of splitting 30 in between MFs/PPF/FDs. Is it a wise investment ? What all to look when investing in these ?
That leaves me 60%, out of which 20% is kept for emergencies. 40% for monthly expenditure.
Any help/guidance will be appreciated.

 

[John4321]

I take some help from traderji.com

 

[alekhkhanna]

^^ Thanks John. Can you also tell me what have you invested in, in how much percentage of your salary/earnings ?

 

[bond_bhai]

1Lakh into PPF - Per year.
Find 3 - 4 Mutual Funds which you think are good. Start putting money every month. Invest on this for a long term. Keep some money as emergency in an FD/Sweep accounts.

Now the best way to "Plan" is not just putting in money somewhere. Try Investing by Goals. See what your goals are, Ex: Buy Flat in 5 Years, Required Funds - say 10L (Rest Loan etc). Start investing towards the goal. This way, you invest since you know why you are investing. Else, if you just put in money your thoughts wander and you will pull out money sooner, like buying the phone you don't actually need

Also, Before investing, Research - Ex: LIC Jeevan Anand = Low Returns. Whatever product somebody tells you, look it up online there are lots of reviews. Don't make a mistake.

 

[alekhkhanna]

^^ Thanks 007 ke bhai !
I still have to read about PPF. I'm enrolled in EPF though.
Yeah, I'm thinking about MFs but how to know which ones are good ? Can you guide me to a starting point ? Also which MF to chose ? Is the Equity Diversified always good ?
Sorry for the truckload of questions.

 

[mpaspc]

^^ Thanks 007 ke bhai !
I still have to read about PPF. I'm enrolled in EPF though.
Yeah, I'm thinking about MFs but how to know which ones are good ? Can you guide me to a starting point ? Also which MF to chose ? Is the Equity Diversified always good ?
Sorry for the truckload of questions.

Any amount you pay towards PPf(upto 1l under 80c ) is Tax deductible . Also amount you withdraw is not taxable (at least according to current laws ).
Invest Some amount in equities and Mutual funds too , Dont invest in a single fund , try investing rather small amounts in 3-4 different funds . You may want to invest in gold , like buying 10Gms coins once or twice a year .

Best advice would be stop buying blu-ray's you will save a lot more to invest

 

[alekhkhanna]

Any amount you pay towards PPf(upto 1l under 80c ) is Tax deductible . Also amount you withdraw is not taxable (at least according to current laws ).

Ah. Good to hear. What to do you mean by withdrawing ? Withdrawing from PPF ? Is there any article which explains PPF is a simple manner ?

Invest Some amount in equities and Mutual funds too , Dont invest in a single fund , try investing rather small amounts in 3-4 different funds . You may want to invest in gold , like buying 10Gms coins once or twice a year .

Yeah, that's what I was thinking after reading some investment-related sites. Put down 1k-2k on 3-5 MFs. But I'm still confused at the different types, from Equity to Debt and the top MFs in which I should invest. I also read there are MFs which invest in gold ? How do they fare ?
Finally, what about STP ? I don't have a lumpsum amount to invest atm, so I think STP is out of question, eh ? Should I go for SIP ? I still couldn't understand the differences between SIP and MFs. Also "market is bullish or bearish". :ashamed: :ashamed:

Best advice would be stop buying blu-ray's you will save a lot more to invest

Sadly will be reducing the buying (though after Black Friday ).

 

[Lord Nemesis]

I put 1 Lac into PPF, 32k in Insurance and rest in FD's. Don't really like risky investments.

 

[alekhkhanna]

I put 1 Lac into PPF, 32k in Insurance and rest in FD's. Don't really like risky investments.

But aren't the returns with FDs less ? I mean TDS is cut from the returns, right ?
Also how risky is a MF, specially the Equity Diversified one ? I think the Debt MF is even safer.

 

[NinByChoice]

FD is safer than DebtMF. But DebtMF sold after a year dont have capital gains tax, while FD returns are taxed (unless its the 5 year tax saving FD).

 

[alekhkhanna]

FD is safer than DebtMF. But DebtMF sold after a year dont have capital gains tax, while FD returns are taxed (unless its the 5 year tax saving FD).

Yeah, FD is the safest deposit. What I meant was to compare Equity and Debt. Among those 2, Debt is safer, right ? But Equity gives more return, eh ?

 

[Lord Nemesis]

But aren't the returns with FDs less ? I mean TDS is cut from the returns, right ?
Also how risky is a MF, specially the Equity Diversified one ? I think the Debt MF is even safer.

I would rather risk getting less returns than risk the principal itself. In any case, AFAIK, returns from MF's are also subject to Taxation.

 

[Freaky]

It is also not wrong to invest in stocks - pick and choose fundamentally strong ones, invest and forget about them. Classic example is that of TTK Prestige - this same day in 2009 it was trading at 330. Today it trades at 3300 This is just one such example. Only issue here is that people tend to get trigger happy and start into the habit of trading rather than invest

 

[alekhkhanna]

I would rather risk getting less returns than risk the principal itself. In any case, AFAIK, returns from MF's are also subject to Taxation.

Good advice.
Can you explain the insurance part (32k in Insurance) ? I've heard that Term Insurance is really good in case of actual death, but then it gives no benefits it you stay alive (but the premiums are less).

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It is also not wrong to invest in stocks - pick and choose fundamentally strong ones, invest and forget about them. Classic example is that of TTK Prestige - this same day in 2009 it was trading at 330. Today it trades at 3300 This is just one such example. Only issue here is that people tend to get trigger happy and start into the habit of trading rather than invest

Yeah, I've to read more on stocks, but don't really have anyone to guide me on them in a simple manner. Also dad invested in some stocks based on a friend's advice (bad move I know) and lost quite a handful sum.
Is there a site which explains stocks a bit easily ? Bull, bear blah blah. And how to look out for good ones ? I know the whole experience cannot come in a day, but just need a good place to start.

 

[mpaspc]

Insurance premium depends on the cover you want .Insurance is not an investment . The amount you receive on maturity is not that great , in simple words its just a risk cover .

Fd's are safer but interest is only about 9% and then tax over it , unless you go for 5 year Fd's . PPF is better here since you dont have a lumpsum amount to invest in Fd for 5 years .

In equities there are few chances of windfall gains and losses too . price of united spirits increased from 1400 to about 1800 in a single day . Wished had retained them .

 

[Lord Nemesis]

Insurance is not really an investment per say as in something you do to increase your wealth. Its just a contingency measure to safeguard the interests of your loved ones in case of an unforeseen circumstances. Don't let any one sucker you into investing your money into insurance plans as a means for growing your wealth.

In any case, I have lost all faith in insurance policies after seeing how my cousin still did not get the life insurance on her husband after he passed away in an accident little over an year ago.

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Fd's are safer but interest is only about 9% and then tax over it , unless you go for 5 year Fd's . PPF is better here since you dont have a lumpsum amount to invest in Fd for 5 years .

Even if you go for 5 year FD's, AFAIK, you would still be liable to pay tax when the FD matures. Its just that you can use a 5 year FD to get tax exemption in the year that you invested. Apart from PF/PPF/Insurance, I don't know of any other standard/common investment option where your returns are safe from taxation.

- - - Updated - - -

It is also not wrong to invest in stocks - pick and choose fundamentally strong ones, invest and forget about them. Classic example is that of TTK Prestige - this same day in 2009 it was trading at 330. Today it trades at 3300 This is just one such example. Only issue here is that people tend to get trigger happy and start into the habit of trading rather than invest

The strong ones rarely give you good returns (at least in the short run). Its the risky ones where you can gamble to get good returns. As for the long run, who knows how the dice will roll.
Example: Satyam.

I know lots of colleagues who invested in Satyam that sold of their shares at 20% (or even less) of their original investment amount when the Satyam fiasco happened. That was the first (and only) time that I invested in stock market. I bought Satyam Shares when the share price went below 20 Rs and sold them a few months later when the shares hit 100 Rs again. Most of my colleagues lost 80% or more of their investments in Satyam while I quintipuled my investment in a few months. In fact, one of my sisters colleagues invested 4 Lac when the Satyam Shares went below 7 Rs and made a fortune when it went above 100 Rs. thats the thing with stock market. you can either increase your investment many fold or you can also loose it utterly.

 

[Freaky]

The strong ones rarely give you good returns (at least in the short run). Its the risky ones where you can gamble to get good returns. As for the long run, who knows how the dice will roll.
Example: Satyam.

I know lots of colleagues who invested in Satyam that sold of their shares at 20% (or even less) of their original investment amount when the Satyam fiasco happened. That was the first (and only) time that I invested in stock market. I bought Satyam Shares when the share price went below 20 Rs and sold them a few months later when the shares hit 100 Rs again. Most of my colleagues lost 80% or more of their investments in Satyam while I quintipuled my investment in a few months. In fact, one of my sisters colleagues invested 4 Lac when the Satyam Shares went below 7 Rs and made a fortune when it went above 100 Rs. thats the thing with stock market. you can either increase your investment many fold or you can also loose it utterly.

I don't agree that the strong ones give you good returns - they're ticked as strong stocks only because they give you returns. Remember there are lots of stocks that may not have substantial price movement but give you returns in terms of dividend and rights shares.
Again, if you look back at my post I've specifically mentioned invest and not trade. Am sure majority of those who lost money in Satyam were looking to make a quick buck.

 

[Aces170]

^^ Agrees, look at Apple stock in the past 2-3 years will even make a Z group stock in an operator level rigging scheme look like small gain. I would say investing in the Sensex or NIFTY shares a relative safer bet for the longer term.

Dont put all your eggs in one basket, invest in equity as well debt related mutual funds. If you want your fund to be relatively liquid, as well as close to zero risk, invest in the money market funds (Government bills/bonds etc)

 

[singenaadam]

1. Insure yourself for the requirements - buy term plans.
2. Set aside an emergency fund - upto 6 months of expenses - in a liquid MF.
3. Exhaust the PPF limit - 1 lakh per anum. If you don't have a PPF a/c, get one from ICICI Bank. It will give you on-line access.
4. Since you say work exp of 2 yrs, I am assuming that you are ~25. Buy some good index mutual funds/large cap stocks.

For MFs ratings & detailed info: valueresearchonline.com.

 

[alekhkhanna]

Insurance premium depends on the cover you want .Insurance is not an investment . The amount you receive on maturity is not that great , in simple words its just a risk cover .
Fd's are safer but interest is only about 9% and then tax over it , unless you go for 5 year Fd's . PPF is better here since you dont have a lumpsum amount to invest in Fd for 5 years .
In equities there are few chances of windfall gains and losses too . price of united spirits increased from 1400 to about 1800 in a single day . Wished had retained them .

Insurance is not really an investment per say as in something you do to increase your wealth. Its just a contingency measure to safeguard the interests of your loved ones in case of an unforeseen circumstances. Don't let any one sucker you into investing your money into insurance plans as a means for growing your wealth.

Got it. But which is better - a term insurance for say 60-70 lacs or the likes of LIC policies ?
About the bolded part, yeah, we were recently suckered in an Aegon Religare plan which promised lots and delivered shit.

I don't agree that the strong ones give you good returns - they're ticked as strong stocks only because they give you returns. Remember there are lots of stocks that may not have substantial price movement but give you returns in terms of dividend and rights shares.
Again, if you look back at my post I've specifically mentioned invest and not trade. Am sure majority of those who lost money in Satyam were looking to make a quick buck.

But for investment purposes, one needs to have a good idea of the market, eh ? Should I go to a stockbroker ? Or can I mostly learn online from sharekhan etc ?