ARE MY INVESTMENTS SAFE
QUERY...
Sir, I have been investing in Mutual Fund both equity n debt for last 4 yrs. However, I was looking for some parallel or secondary mode of income as backup for my MFs in case of some eventuality 15-20 yrs down the line. While searching I came across this HDFC Sanchay Plus plan. With interest rates falling year after year, I presumed IRR of 6.25-6.5% is a good deal.
How should I diversify further w/o getting lured into buying something not good?
Rajeeve Kaushik, [25-11-2021 08:56]
[In reply to XXXXX XXXXXX ]
It is very important to be aware of one's finances and also future projection. This always lays down the foundation of one's planning. The questions which you are facing also occurred to me almost 3 decades ago. However net wasn't around, options were limited, equity options were restricted despite my awareness as the capital market was opaque- 1991 liberalization had just started with adverse publicity like we hear nowadays for demonetization and ITax rates were astronomical. But bank interest rates were 12% so was ppf , NRNR deposits hadn't kicked in yet with their interest rates at up to 18% p.a.(YES 18%).
My search and research yielded a word called Mutual Funds ( which hadn't made their inroads in India before 1995), UTI's US64 was a answer which in 2000 yielded into the biggest scam despite being a government company... and... THIS IS YOUR CONCERN!!!
Your concern is actually not of returns but that of consolidation of your gains.
You feel what if something happens to the MF industry and your capital vanishes.
This is where ASSET ALLOCATION comes in. In common parlance we classify assets as Equity, Debt, Gold, Real-Estate , REIT , Art, etc . But in my view we can classify them into sub-options as well- These are PPF, NPS, Bank FDs, Direct stocks, Physical gold, Gold ETFs, E- gold as well.
While choosing options one must not only look at legality and return of options but also the cost of the plan.
The plan that you have mentioned could fall into the category Pension Plan , ULIP etc etc but anyone who gives you assured returns(in print) it cannot be more than 5-6% and sad part is that you will have to pay tax on that.
Now assuming you will need 2 lacs pm in your retirement , please calculate how much you will need to invest to get 6% return which equals 24 lacs. Then again the expenses will not be static but your income will be- which will leave you with a shortfall within 5 years. I HAVEN'T YET CALCULATED THE TAXES ON YOUR FIXED INCOME RETURNS.
So now you need a avenue from where the returns should be high even if not assured and in
keeping with inflation and also be TAX EFFICIENT.
This where your judgement will come in hand at distributing your salary between NRE FD, FCNR, Equity MFs , Debt MFs, PPF, NPS, Gold ( I don't stand with Real estate except the house that you need for residing- NOTHING ELSE).
AS for your concern about safety of your capital as you can see even the government's sanctioned currency wasn't safe. Even those who had crores in the bank and legal -couldn't get their money for sometime And I gave you the example of UTI scam in the beginning. After that UTI itself was split by the GOVT so that it couldn't be sued etc. SO vigilance is important . And the only tool toward that is Awareness and not fear.
Now SEBI is much more tighter than ever before and MF industry is the most regulated in the world.
With coming of Passive funds the idea of fluctuation of fund performance is also gone.
It took me whole lifetime to learn that the people who were rich in 60's and 70's were not those who had large real estates but whose forefathers had invested in shares in 1880's.
I have myself seen a share certificate of a company in Dehradun issued at face value of 50 paisa per share - for 10000 shares. I narrowly missed buying the paper for it's antique value since company was long closed.
When the owner of the certificate was contacted I was informed that it was sold to someone very influential for Rs.5000 a share!!! This was because the company still owned the largest land bank in Dehradun since 1800's
Now you do the math!!!
The formalization of shareholding and partnership is a gift from the west but we Indians haven't yet recognized it.
So now junk that mindset of 60's and 70's we aren't living in 12% bank interest times but our requirement is still of minimum 12% return so search for them. However during your search just remember ONE thing....
KEEP IT STRAIGHT & SIMPLE.
This group will not make you a millionaire overnight ... but it will help you keep on the path to be a MULTI MILLIONAIRE... and that is a certainty.
The group has been constructed in the great spirit of Mutual Knowledge (MK instead of MF) which should be free to take and return; something like a partnership library without membership but where you have to add a book in return for 100 that you read. It is not dependent on me or anyone person... as I and others pass away, there will many who will emerge to keep others motivated.
So now over to all of you...
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