Where should I make investments?

[MAGNeT]

Just feeling to share my neighbor friend views.

He too is in similar boat.He wants to change job because he says he will get 15-20% appraisal.He is getting some 6 lakh package i guess(he never disclose same).But reason for job change is he says every month 5000 rupees cuts as tax (from that i calculated package to be around 6 lakh+).
He said after job change he will be able to make investments into instrument and save taxes.In short his thinking is the extra he would get will go into savings.
He watches new movie first day first show.Make trips all over country/Right now in Sikkim for 10 days personal trip.Make dinner at big hotels in city every week once.Wear new clothes.And for savings he says just as salary comes in account he doesn't keep more than 30 rupees in account.
In short out his first priority is expenditure and savings is the last important part for him.

And the most funny part i see is he feels the appraisal extra (which will go in tax savings)will fund his dream in Mumbai of buying his families 3rd flat here.

Also last night i was watching a financial planning program on cnbc i saw a person earning 65000 monthly but for savings he had good chunk of 6-7 money back lic or pension policies.
In short people even though how good they earn in finance planing they are total noob.

Now coming to you allek.

1: PPF is a very long term investment planing tool.It has 15 years lock in(16 to be precise as first year is counted as zero year).After 6 years you can withdraw some money i guess 60% of present value at 1% higher interest rate than the percent return you get.
Interest you get is tax free.Also this instrument cant be liquidated by any government or private institution in case you defaulted some loan in future.
Since you already might be having EPF i am not sure.But just open a ppf account with 500 bucks at-least the 16 years period will start .Later you can adjust money invested into it with epf you get.

2::As a thumb rule always have money upto 6 months of salary in your liquid account or which you can keep at your disposal when needed in no time.It can be in liquid mutual funds or short term fixed deposits.I feel banks which give good savings interest rate that too can help.

3::Also if you are an earning member take term insurance with good cover and yes don't mix insurance and investments.

4::Stay away from stock market unless you know or have enough money to survive your daily needs atleast for a year if you loose every penny you invested in stocks.

The example of Satyam as mentioned by nemesis always looks attractive on papers and makes one to enter market.But thats 1 out 1000 example and that example happens on one bright day in 10 years.Always count yourself to be in 999 out of 1000 when investing in stock market.Freaky mentioned about TTK prestige giving 1000% return in 3 years.But does fundamentally you think a pressure cooker selling company stock to give that much return in 3 years.Does a person buy 10 cookers a week that the company made so much profit that it stock valuation jumped 1000 times.
Hence untill one knows how market works one should avoid putting money in stocks.Just see human psychology when someone says to buy this washing machine for 15000 we do 100 analysis on net and than decide whether to go for that model or not .But when someone in lift gives a tip on shares we directly put 50000 into it without analyzing.

If you still feel to invest in stocks anyhow.Invest in those who dont have debts,good cash flow,good dividend paying records and you feel like company will grow or cash coming wont be trouble.Also not much affected by government policies like subsidies(sugar,oil,gas,real estate most affected)(pharma ,consumer goods are least affected of government controls)

5::Mutual funds are good instrument as its the company who analyst and move money from one stock to another.If you want good returns go for equity oriented funds(risks involved).If you need money at any point of time and need returns as same as fixed deposits go for liquid /short term debt funds(Someone mentioned debt funds to be risky ,than even banks fixed deposit too are risky,debt funds have least risks).Also suppose you work in pharma or say in banking industry you can choose banking or pharma funds as you know better when they will be in good or bad time.

6::Use sweep in fixed deposits facility if money is unutilized for long period in account.

I guess just for basic at-least this much is good to make a start.

 

[alekhkhanna]

^^ 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)

Can you please explain the bolded part ? Any examples of government bills/bonds ?

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.

Thanks. I'm 28 not 25. Higher age as I'm a doctor and MBBS takes up 6 years of your life. :/
What does liquid MF mean ? I'm going through Valuesearchonline. Thanks for the link !
Also what exactly is the difference between EPF and PPF (I know one is Employee PF and other is Personal PF, but actual differences as an investment POV)? If I've EPF, should I still opt for PPF ? Is EPF really necessary or should I opt out of it ?

 

[kippu]

for long term, buy blue chip and just put it in some nice bank vault and forget about it ,

 

[alekhkhanna]

Just feeling to share my neighbor friend views.

He too is in similar boat.He wants to change job because he says he will get 15-20% appraisal.He is getting some 6 lakh package i guess(he never disclose same).But reason for job change is he says every month 5000 rupees cuts as tax (from that i calculated package to be around 6 lakh+).
He said after job change he will be able to make investments into instrument and save taxes.In short his thinking is the extra he would get will go into savings.
He watches new movie first day first show.Make trips all over country/Right now in Sikkim for 10 days personal trip.Make dinner at big hotels in city every week once.Wear new clothes.And for savings he says just as salary comes in account he doesn't keep more than 30 rupees in account.
In short out his first priority is expenditure and savings is the last important part for him.

And the most funny part i see is he feels the appraisal extra (which will go in tax savings)will fund his dream in Mumbai of buying his families 3rd flat here.

Also last night i was watching a financial planning program on cnbc i saw a person earning 65000 monthly but for savings he had good chunk of 6-7 money back lic or pension policies.
In short people even though how good they earn in finance planing they are total noob.

Thanks for examples @MAGNeT. As I said, even I wasn't a savings kind of person but a recent problem in the family made me think about it. And now I want to save a decent part of my salary.

Now coming to you allek.

1: PPF is a very long term investment planing tool.It has 15 years lock in(16 to be precise as first year is counted as zero year).After 6 years you can withdraw some money i guess 60% of present value at 1% higher interest rate than the percent return you get.
Interest you get is tax free.Also this instrument cant be liquidated by any government or private institution in case you defaulted some loan in future.
Since you already might be having EPF i am not sure.But just open a ppf account with 500 bucks at-least the 16 years period will start .Later you can adjust money invested into it with epf you get.

Thanks for a somewhat detailed explanation on PPF. The bolded part is really good, though I'm still not sure whether I would go for a loan or not. My aim is to make up as much capital as possible and minimize loans if needed.
Again though, is EPF really necessary ? I had some EPF collections with my previous organization (Medecins Sans Frontieres) and filled out a form to withdraw it. Been more than 6 months and no news on that front.

2::As a thumb rule always have money upto 6 months of salary in your liquid account or which you can keep at your disposal when needed in no time.It can be in liquid mutual funds or short term fixed deposits.I feel banks which give good savings interest rate that too can help.

Currently I have zero savings. So after getting my salary from next month, should I start investing in MF/PPF right away or should I first try to save the 6 months salary first, say in a sweep-in account and only after I hit the golden number should I start with the other investments ? Also considering I've to take a term insurance as well, which for my age shouldn't cost more than 7-8k per year for ~60 lacs. Will increase it with increments in salary.

3::Also if you are an earning member take term insurance with good cover and yes don't mix insurance and investments.

Got it. Unanimous advice by everybody !

4::Stay away from stock market unless you know or have enough money to survive your daily needs atleast for a year if you loose every penny you invested in stocks.

The example of Satyam as mentioned by nemesis always looks attractive on papers and makes one to enter market.But thats 1 out 1000 example and that example happens on one bright day in 10 years.Always count yourself to be in 999 out of 1000 when investing in stock market.Freaky mentioned about TTK prestige giving 1000% return in 3 years.But does fundamentally you think a pressure cooker selling company stock to give that much return in 3 years.Does a person buy 10 cookers a week that the company made so much profit that it stock valuation jumped 1000 times.
Hence untill one knows how market works one should avoid putting money in stocks.Just see human psychology when someone says to buy this washing machine for 15000 we do 100 analysis on net and than decide whether to go for that model or not .But when someone in lift gives a tip on shares we directly put 50000 into it without analyzing.

If you still fee to invest in stocks anyhow.Invest in those who dont have debts,good cash flow,good dividend paying records and you feel like company will grow or cash coming wont be trouble.Also not much affected by government policies like subsidies(sugar,oil,gas,real estate most affected)(pharma ,consumer goods are least affected of government controls)

Golden words IMO. Plus one needs to first learn how markets responds and which stocks are strong. Also I think it's a pretty risky venture, specially in the early years of my employment since I've no clue of it.
Since I'm getting employed at one of the pharma companies, will keep an eye on their stock and see how it goes. Thanks for the advise.

5::Mutual funds are good instrument as its the company who analyst and move money from one stock to another.If you want good returns go for equity oriented funds.If you need money at any point of time and need returns as same as fixed deposits go for liquid /short term debt funds(Someone mentioned debt funds to be risky ,than even banks fixed deposit too are risky,debt funds have least risks).Also suppose you work in pharma or say in banking industry you can choose banking or pharma funds as you know better when they will be in good or bad time.

6::Use sweep in fixed deposits facility if money is unutilized for long period in account.

I guess just for basic at-least this much is good to make a start.

Nice.
So IMO, a good start will be to invest say 20% of my salary, equally divided into Equity and Debt funds ? But again, should I get to it right away with my 1st paycheck or should I save for some months (5-6) and then start with these investments ? I'm scheduled for an increment after 6 months anyway, so should have some extra (although minor) cash flow after April.
Thanks a ton for the point-to-point answers @MAGNeT.

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for long term, buy blue chip and just put it in some nice bank vault and forget about it ,

Seems to good to be true !

 

[Aces170]

Can you please explain the bolded part ? Any examples of government bills/bonds ?

There are these certain funds which invest in only Sensex 30 or NIFTY 50 stocks, and they will keep changing the mix as and when stocks exit enter the the indexes. If you look at the CAGR of past five years, the index has outperformed most of the funds, so why not invest in an index fund itself. The stocks are big blue chip companies (hence lower risk) plus the returns are good.

By Government bonds/bills etc, I meant the 90 day T-bills or the 5-10 year GSecs, you do not have to invest in them directly (infact you cant as minimum corpus size is Rs 50 lakhs and above). However you do have money market funds which invest in such instruments, and you can invest into those funds. Talk to your personal banker he can list out the options to you. Personal bankers or RM's at your local banks are a good bet to list out options, but just close your ears when they try to pitch in insurance funds. I and almost all people in the financial background have a strong feeling that investment and insurance should never be mixed, most of the banks get a heavy chunk of commission in term insurance sold and hence they will try to sell that to you most.

 

[Hacker]

There are these certain funds which invest in only Sensex 30 or NIFTY 50 stocks, and they will keep changing the mix as and when stocks exit enter the the indexes. If you look at the CAGR of past five years, the index has outperformed most of the funds, so why not invest in an index fund itself. The stocks are big blue chip companies (hence lower risk) plus the returns are good.

What Aces is saying that you should invest your money in an Exchange Traded Fund which tracks NSE Nifty e.g. Goldman Sachs Nifty Bees. You wont hear about such funds because the financial advisor does not get any commision if you buy shares of such ETF's. Buying Nifty Bees ETF is like investing your money in the Nifty 50 stocks so even if one stock goes down like Satyam, it does not affect the index.

I personally use Craytheon - Fundamental Analysis and Stock Valuation Simplified for investing in the stock market but its not for beginners.

 

[NinByChoice]

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.

Sorry, my earlier post wasnt clear.

Shares/MFs held for >1 year and then sold, fall under long term capital gains. The profit from this is not taxed. There are tax saving MFs (ELSS) for which the principal is also exempt, under the combined Rs100,000/year just like other tax saving mechanisms. So, if you invest in a tax saving MF, the invested amount and the returns are not taxed. Of course, as with any MF returns are not guaranteed.

In a 5 year tax saving FD - the principal is tax exempt. The interest is taxable at maturity. Returns are guaranteed at the rate of interest.

 

[alekhkhanna]

There are these certain funds which invest in only Sensex 30 or NIFTY 50 stocks, and they will keep changing the mix as and when stocks exit enter the the indexes. If you look at the CAGR of past five years, the index has outperformed most of the funds, so why not invest in an index fund itself. The stocks are big blue chip companies (hence lower risk) plus the returns are good.

By Government bonds/bills etc, I meant the 90 day T-bills or the 5-10 year GSecs, you do not have to invest in them directly (infact you cant as minimum corpus size is Rs 50 lakhs and above). However you do have money market funds which invest in such instruments, and you can invest into those funds. Talk to your personal banker he can list out the options to you. Personal bankers or RM's at your local banks are a good bet to list out options, but just close your ears when they try to pitch in insurance funds. I and almost all people in the financial background have a strong feeling that investment and insurance should never be mixed, most of the banks get a heavy chunk of commission in term insurance sold and hence they will try to sell that to you most.

So by big blue chip companies, you mean like SBI Blue Chip ?
About the 2nd part, I tried searching for T-Bills, but didn't find much help online. Can you guide me somewhere which helps me in the same ?
About Term Insurance, from what I understood, there is absolutely no return until you're dead. It's just a risk cover, not an investment. Right ?

What Aces is saying that you should invest your money in an Exchange Traded Fund which tracks NSE Nifty e.g. Goldman Sachs Nifty Bees. You wont hear about such funds because the financial advisor does not get any commision if you buy shares of such ETF's. Buying Nifty Bees ETF is like investing your money in the Nifty 50 stocks so even if one stock goes down like Satyam, it does not affect the index.

I personally use Craytheon - Fundamental Analysis and Stock Valuation Simplified for investing in the stock market but its not for beginners.

Thanks for the explanation. I did read about Nifty Bees on JagoInvestor but if I want to invest in them, how should I go about it ? Something for a beginner ?

Sorry, my earlier post wasnt clear.

Shares/MFs held for >1 year and then sold, fall under long term capital gains. The profit from this is not taxed. There are tax saving MFs (ELSS) for which the principal is also exempt, under the combined Rs100,000/year just like other tax saving mechanisms. So, if you invest in a tax saving MF, the invested amount and the returns are not taxed. Of course, as with any MF returns are not guaranteed.

In a 5 year tax saving FD - the principal is tax exempt. The interest is taxable at maturity. Returns are guaranteed at the rate of interest.

Short and simple. Thanks !

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@NinByChoice @Hacker @Aces170 @kippu @MAGNeT @bond_bhai @mpaspc @Freaky (Sorry for tagging you all ) Please help let me learn by a real-life example.
My dad invested in 2 Reliance Equity Advantage Funds in August 2007, with an investment of Rs 20000 in each. At the time of investment, NAV was 10.000, Load was 0.2250, Price was 10.225 and number of units were 1955.990 (same for balance units).
Now how do I interpret this data today ? How do I see the growth, dividend, bonuses etc ? What to make out of this fund ?
A quick Google tells this was renamed to Reliance Top 200 fund and is found here on ValueSearchOnline. A quick look says the risk is average, returns are above average and it's a Large Cap Equity, so from what I understand, it's a safe fund. But dad says he hasn't got any returns till now from this fund.
Can anybody please be kind enough to explain this ? Will help me to read other funds as well.

 

[NinByChoice]

Unless you invest in a MF that pays out regular dividends, you wont see returns like a conventional FD. FDs are returned to you at the end of the tenure (or interest payouts periodically if you choose). MFs have to be redeemed by you, whenever you want.

Current NAV is 13.6. Im not sure if they have paid dividends since you bought it. Returns are ~36% over the last 5 years (~6.3%/year). Thats lesser than most FDs.

DebtMFs have pretty good returns now, due to the high interest rate. These are my preferred medium term investment option now. Even a very safe DebtMF has returns of 10-12%, which is higher than FD. Also if I sell the MF after a year, I dont pay tax on the profit. Even in a 9% 1 year FD, my effective return is only 6.3% after tax.

 

[alekhkhanna]

Unless you invest in a MF that pays out regular dividends, you wont see returns like a conventional FD. FDs are returned to you at the end of the tenure (or interest payouts periodically if you choose). MFs have to be redeemed by you, whenever you want.

Current NAV is 13.6. Im not sure if they have paid dividends since you bought it. Returns are ~36% over the last 5 years (~6.3%/year). Thats lesser than most FDs.

DebtMFs have pretty good returns now, due to the high interest rate. These are my preferred medium term investment option now. Even a very safe DebtMF has returns of 10-12%, which is higher than FD. Also if I sell the MF after a year, I dont pay tax on the profit. Even in a 9% 1 year FD, my effective return is only 6.3% after tax.

Hmmm. Thanks ! Things are slowly getting clearer.
What does medium term investment mean ? 1-3 years ? How do you decide the time to sell it ? Yearly plans ? Depending on the NAV ? Reaching a threshold ?
Among the Debt MF, I see ICICI Prudential GIPF as a good option (seeing the last 5 years) with 11.47% returns. Am I seeing correctly ?

Also forgot to mention my Dad's MF is a Divident Investment type. So the correct ValueRSO is here.

 

[mpaspc]

Returns are never guaranteed and they are always fluctuating . Sell when you have booked decent profit , or there is another downturn like the one in 2008-2009 . Best time to enter is when the market is completely down during recession . The returns are always great . There is a lot of great information on this thread which should be enough for a start .

Start reading Wealth times , comes as a supplementary with economic times on monday . This will help you to understand better with one or two real life examples of a family's savings break up .

Also save your salary for a few months and get them converted into FD's of small amount each month at least for 3-4 months . Then you can start saving into equities / debt fund / MF's / Gold etf's .

Buy a term plan when ever your cash flow permits . Do it as soon as you can .

 

[kippu]

you know if i could turn back time to when i was 25 i would probably taken a loan and bought a one bedroom apartment , given on rent and paid emi also....5-10 years you would have one property and get ready for another one , forget all these funds ...just a tangential idea

 

[alekhkhanna]

Returns are never guaranteed and they are always fluctuating . Sell when you have booked decent profit , or there is another downturn like the one in 2008-2009 . Best time to enter is when the market is completely down during recession . The returns are always great . There is a lot of great information on this thread which should be enough for a start .

Start reading Wealth times , comes as a supplementary with economic times on monday . This will help you to understand better with one or two real life examples of a family's savings break up .

Also save your salary for a few months and get them converted into FD's of small amount each month at least for 3-4 months . Then you can start saving into equities / debt fund / MF's / Gold etf's .

Buy a term plan when ever your cash flow permits . Do it as soon as you can .

Thanks. I was also planning on saving for a few months and then investing in MFs. But I will start a PPF right away. Also instead of converting all of them in FDs manually, why don't I just activate sweep-in in my account ? It's liquid. Cash above a threshold gets converted to FD automatically and I get returns for the number of days it's been kept as FD, but it is still breakable with an ATM withdrawal. Only thing I need to know is whether Axis Bank follows FIFO or LIFO ? Would prefer banks with FIFO.

you know if i could turn back time to when i was 25 i would probably taken a loan and bought a one bedroom apartment , given on rent and paid emi also....5-10 years you would have one property and get ready for another one , forget all these funds ...just a tangential idea

I don't know whether I'm ready for a property yet. Also I don't wanna be bound by regular EMIs. Plus we've been living on rent since my childhood and I don't really feel the need to have a house of my own. If I have it, it's good, but not a necessity. Even as an investment, the CAGR, if seen for the past decade for property is around 13-15%, which is equal to what Equity MFs will give you (maybe slightly less). But again, you're investing a lot more in property. Plus the real estate bubble can burst any minute. Already properties in the city centers are feeling the crunch with absolutely crazy prices and nobody to buy them. City outskirts are still profitable though, but how can I assume a house bought today, specially with the kind of materials the builders use nowadays, will see another 20 years ? Outwardly the houses look fine, but we've already seen that 5 years down the line you'll have all kinds of maintenance costs and headaches. Lands are still reliable, houses, not so much IMO.

 

[MAGNeT]

My aim is to make up as much capital as possible and minimize loans if needed.
Again though, is EPF really necessary ? I had some EPF collections with my previous organization (Medecins Sans Frontieres) and filled out a form to withdraw it. Been more than 6 months and no news on that front.

EPF is similar to PPf but here contribution is made by employee.I have minimum knowledge as i belong to business class.A

Also its not a wise decision to withdraw epf amount.Its a retirement fund.

10 hidden EPF Rules – Employee Provident Fund

PPF atleast you wont get chance to withdraw.Open an account with 500 rupees.Will decide later.Because 16 years is a very long period.I started mine in 2007 with just 1500 rupees until 2009 end and than i realize compounding power and now has open an account of my mom too even though she doesn't earn.But that will help creating wealth later.

Currently I have zero savings. So after getting my salary from next month, should I start investing in MF/PPF right away or should I first try to save the 6 months salary first, say in a sweep-in account and only after I hit the golden number should I start with the other investments ? Also considering I've to take a term insurance as well, which for my age shouldn't cost more than 7-8k per year for ~60 lacs. Will increase it with increments in salary.

Start a recurring account pass some fund into it.Also keep some amount save as emergency fund.Also start a PPF account with minimum investment(wherever you like sbi,post office icici your wish).
Since its zero savings i dont see any fixed deposit stuff later when recurring mature pass it into fixed deposit.

Get a term insurance ,also possible get a personal accident cover insurance.Since term insurance pays in death whereas accident happen anywhere and what if you survive an accident and say hospitalize paralysed.Term insurance wont come of any use.If you feel trouble reduce term insurance package to 40 lakhs now and go for personal accident cover too.

Also insurance is subject to salary .If annual package is 4 lakhs.40 lakhs is maximum cover you get or show assets like property on name you show to increase cover.

Nice.
So IMO, a good start will be to invest say 20% of my salary, equally divided into Equity and Debt funds ? But again, should I get to it right away with my 1st paycheck or should I save for some months (5-6) and then start with these investments ? I'm scheduled for an increment after 6 months anyway, so should have some extra (although minor) cash flow after April.

Just open a mutual fund account with mutualfundsindia or fundsindia or if you ready to track buy directly from fund house(but i recommend buying from first 2 platforms) as they have good tools online whereas fund house tracking is dull and boring.

Since you young you can take aggressive route to invest in equity oriented.Debt funds if you want than no point going for fixed deposits.

Since you almost have zero money no point putting money in fd and debt funds.Better for you is to start recurring deposits.

Priority for you to in order according to me.

1: Open ppf account (minimum balance) .

2::Get term and personal accident cover first.

3::Recurring deposits.

4: Start mutual fund house account ad if want start account in bank where savings rate is high like kotak and yes bank(mind you follow minimum balance rule strictly else you will turn poor much easily).

5::Start preparing for final days now,you might think you have time or say after 5 years you might take plush job in us where you'll save 8 lakhs annually and prepare than.But i see young generations this days even after their dad gives them best firecrackers and latest gadgets(iphone 5 and ipad) they feel ashamed to help their parents in giving hand for groceries handing.How will they take care in their future.Better be self responsible and self sufficient and handle finance as much as you can.

Banks Rm,CAs(to some extent),stock tiper and all are leechers to an extent in their limit.They will make you down to earth in one shot.

 

[alekhkhanna]

^^ Thanks a ton @MAGNeT. PPF is also on my 1st preference atm. Have to look into recurring deposits.
Term and personal accident cover is something I'm thinking 7-8 months down the line, after I've saved some emergency funds (in a sweep-in account). Same for MFs.
Yes Bank is giving good returns at the moment, but do you think it will last ?

 

[MAGNeT]

Yes Bank is giving good returns at the moment, but do you think it will last ?

In February you will come to know(banks base rate will cut in december and than all fd rates will go down).Yes banks was catering to niche sector and now wants to grow hence these rates.But bad is their damage power charges are high.Personally i myself dont have any account with any such banks.I prefer keeping money in small term fd than these banks.As i have good chunk of cash in banks.This banks keep a serious tab on all your contribution and keep pestering for insurance via relation managers.

Also regarding your reliance fund.I guess you might be having your folio number.You can download forms or update online your details or take print out sign it and send to their office for pan,mobile and email update.Once done you can easily track.Also possible apply for pin with same mail.
I recently did for all my funds and later transfered it to fundsindia.Now all my investments are click away.

 

[alekhkhanna]

^^ Uh-huh. Didn't know that about the MFs. Will do it asap when I'm back home. Thanks !

 

[medpal]

Many good enlightening posts here I would llike to put my few thoughts.

As you are young and age is on your side you can go for a bir of risk in your investment horizon.

But first I need to know your tax bracket (I mean on average 10% / 20% or 30%)

PPF : As you are a first time investor, this is the best and most secure investment you can have in your portfolio. Right now it gives yearly 8.2% interest compounded annually) you can put in 100000 every year.

If you are not looking at much headache of managing and tracking your investments, you must use all your 80 C limits in this. As this is the only instrument that will stay in EEE segment post implementation of DTC.

Also as its by GOI you are sure of getting your money back unless India goes bankrupt 9In such scenario your money would be useless).

In PPF you can not withdraw your money totally, You can do partial withdrawal after full 7 years of account opening, and you can get loan after 5 years of running account. In a sense you have keep your money if you loose your money somewhere else senselessly.

Insurance : As every one said term plan is the way to go. You can not get returns from Insurance while you are living , you can insure your family safety in case of your untimely death. Neverever I say again loudly NEVEREVER fall in to the trap of excel sheets of returns indications of ULIPs (Equity market based insurance policies).

FDs : They are secured guaranteed return instruments, good for short term planning, still if you fall in higher tax bracket its not proper instrument as your interest income is taxed as per your taxation slabs. They offer quick access, easy availability and instant withdrawal so you should keep your 3 months expense amount in FD.

Mutual funds : Its the best and proper way of investing by a beginner.

They are of two 3 types, Equity (which invest in stocks on your behalf), Debt (Which invest in money market instruments like Govt. bonds, T-Bills, Commercial Papers) (in a sense a risky kind of FD). and Balanced funds which have a mix of both.

Right now Long term profit from stocks and equity mutual fund is tax free so if you keep your investments more than 1 year and you get profit you will not be taxed on profit (principal you have been taxed already in the income year)

So what you should do is select 2 balanced funds (like HDFC Prudence, Birla Sunlife Balanced fund, ICICI Balanced fund) and keep your investment there for a quarter or two, use the option of monthly dividend Reinvestment (If you are in 30% bracket it will be more tax friendly).

Another option is you go for bond fund if you intend to use the money in 6-12 months (good option is Birla Sunlife Dynamic Bond Fund)

After 3/6 months when your research is matured and you ar ready to take risk you should think of equity mutual funds.

There must be many terms here which you may not know the technical details, feel free to ask.

I am going on vacation so may not answer from 22nd onwards will update as and when I return.

 

[Aces170]

They are of two 3 types, Equity (which invest in stocks on your behalf), Debt (Which invest in money market instruments like Govt. bonds, T-Bills, Commercial Papers) (in a sense a risky kind of FD). and Balanced funds which have a mix of both.

Doc the statement is not entirely correct, Gbond, Tbills have the lowest risk associated. The risk is the same as a PSU bank FD, the difference being they are highly liquid, and you are not locked into any period. Commercial paper of corporates is a different story altogether.

However if he is just starting to invest I guess he should stick with equity index funds, and money market funds. Not a big fan of PPF due to a large lock in period, and the rate of interest is not very enticing too.

 

[MAGNeT]

Not a big fan of PPF due to a large lock in period, and the rate of interest is not very enticing too.

At start you will dislike PPF.But when say you already have 20-30 lakh principal corpus in PPF.Than you will really love.

Also the 15 year lock in is for first 15 years.Than you can extend it at a period of 5 years.