TIMES NEWS NETWORK

At the beginningof every newyear, we tend topromise our-selves to accom-

plish a handful of goals bythe time the year ends. A lotof time we end the year a sat-isfied person, havingachieved at least a majorityof the goals. At times, how-ever, we fall short in meetingthose targets and some timewe fall short miserably. How-ever, even if you fall short,never stop having a handfulof practical and achievableNew Year resolutions.

As we start the financialyear 2016-17, below are a setof financial resolutionsfrom two experienced fi-nancial planners which anyinvestor can adopt. Throughthe year till March 2017, ifyou are able to meet some ofthese targets, “after meetingsome of the challenges of dai-ly life and also human emo-tions which may make us losetrack of these resolutions,”as Naresh Pachisia, MD, SKPSecurities puts it, you aremost likely to have a satisfy-ing year as an investor. Andaccording to Mukund Se-shadri, co-founder, MSVen-tures Financial Planners, useapps and the available tech-nology to keep track of yourexpenses because slowly butsurely “expenses are emerg-ing to be the backbone of fi-nancial planning.”

Below each of the resolu-tions there are boxes to helpyou keep track of yourprogress through the nexttwelve months. As youachieve one, fill in or tick therelevant box and at the endof the year aim to feel goodby ticking more boxes thanare left unmarked.

RESOLUTIONS FOR FY2016-17Needs vs Wants: There arethings which you and yourfamily may want but theymay not be neededfor the family.Identify atleast threeitems ofavoidableexpenses inyour family,which youwant but do notneed. This willhelp you to save and investmore. (NP)

Item 1:

Item 2:

Item 3:

Set financialgoals: If youhave not done italready, spendsome time andfind out whatall should beyour finan-cial goals inlife. Thesegoals could short termin nature, medium term orlong term in nature. (MS)

Short term:

Medium Term:

Long term:

Where do you stand now?:Find out all about your cur-rent investments includingmutual funds, EPF, PPF, FDs,

insurance policies, bank ac-counts etc. It’s very impor-tant to have a clarity aboutwhere all you have invested.(MS)

MFs: EPF:

PPF: Bank FDs:

Life insurance:

Keep awatch onexpens-es: Usetechnolo-gy or any

of theconvention-

al methods totrack your expenses. Onceyou know your expenses,along with your assets and li-abilities, 60% of your job re-lating to financial planningis done. (MS)Expenses tracked throughapps/data sheet/keeping adiary:

Have an asset allocationplan: Create an asset alloca-tion plan to meet each of yourfinancial goals, starting withmapping existing invest-ments with goals and as-sessing how much moreyou need to invest regu-larly (like SIPs) to meetyour goals. (NP)

Review Portfolio: Monitoryour portfolio performanceregularly vis-à-vis your fi-nancial goals, take correctiveactions as required and main-tain discipline of regular in-vestments without becoming

victims of human emotionsof greed and panic caused byvolatility in financial mar-kets. (NP)Review in September:

Review in March:

Take a life cover: Ensurethat all the bread earners inthe family have sufficientlyprotected their dependentsfrom calamities of nature bytaking life insurance cover,as per their Life Time Value.(NP)For Person 1: For Person 2:

Have a health cover: Ensurethat each family member issufficiently covered for anymedical exigencies. (NP)For Person 1: For Person 2: For Person 3: For Person 4:

Prepare a will: Make sureall the adult family membershave made their Wills. By Person 1: By Person 2: By Person 3:

NP: Naresh PachisiaMS: Mukund Seshadri

Naitik Shahreplies:As per theinformation andyourrequirements,here are my

recommendations:

Contingency Fund: Youshould have at least threemonths of salary as acontingency fund. Sosurrender the ULIP,presuming it doesn’t provideyou any insurance cover. Youcan transfer this fund in aliquid fund for anycontingency requirements.

Health Insurance: Even ifyour company provideshealth insurance cover toyour whole family, youshould have a separatehealth insurance cover. Incase you change your job andnew employer doesn’tprovide this benefit yourfamily, you will not bewithout a health insurancecover. Also in the absence ofit, you may need to stretchyour savings.

Life Insurance: Since youhave not mention yourmonthly family expenses, Iam assuming whatever leftafter investments and taxes

is your family expenses {Rs11,00,000-(Rs 1,44,000 SIP +Rs16,000 life insurance + Rs1,15,000 approximately astaxes) = Rs 8,25,000 perannum} as a thumb rule you

should have 8-10 times ofyour yearly expenses asinsurance. So Irecommended you to buysome more term insuranceto accommodate the same.

GoalsHigher Education:I assume here a two-yearresidential post-graduateprogramme at a premierinstitute in India will cost anaverage of Rs 12-15 lakh.Considering inflation ineducation at 8-9% in India,your son would require Rs 28lakh and daughter Rs 35lakh. You can start an SIP ofRs 10,000 for your son’shigher education and an SIP

of Rs 8,000 for yourdaughter’s higher education.

Marriage and own house:For this you need to havesome approximate amountsin mind, the current rate ofinflation for such costs, andthen device a plan. The samefor your house, where youalso need to be clear about inhow many years you wantyour own house.

Retirement: Assuming yourcurrent family annualexpenses as Rs 8.25 lakh,your retirement age as 60,life expectancy as 80,inflation at 6.5% constantthroughout your life, yourannual family expenses willbe Rs 29 lakh when youretire. We assume 10%return on investment duringyour retirement years, youwill require Rs 1.2 crore asyour retirement corpous.Considering 12% return onyour equity SIP you need tohave SIPs of Rs 12,000 permonth for your retirement,which you currently have. Sofor your retirementrequirement if you continuethe same SIP till yourretirement, you can meetthis goal.

Naitik Shah runs ShahInvestment Consultants,

Bhavnagar

I am 40 years old, working with an MNC, drawing Rs 11 lakh annually. I have a 10-year oldson and a 6-year old daughter. My investments are:Investments: Four SIPs of Rs 3,000 each, two in tax saver funds for past one year and two inother open ended equity schemes for past four years. Total current value of these invest-ments is about Rs 5.3 lakh. I have a risk cover plan worth Rs 50 lakh, for which I pay a yearlypremium of Rs 8,000. I have another investment in a ULIP, current value is Rs 2.10 lakh afternine years, for which I don’t pay any premium anymore. I have an LIC policy with a yearlypremium of Rs 8,000. I get Rs 20,000 every four years from this policy. I got this amounttwice, will get one more and thereafter probably I’ll get another Rs 1 lakh.Goals: Children’s higher education and marriage, a house of our own and retirement.

Mohammed Iqbal

INVESTOR QUERYI HAVE RS 4 LAKH THAT I WANT TOINVEST IN DIFFERENT MUTUAL FUNDS.SINCE INVESTING ALL OF IT AS ALUMP-SUM IS RISKY, I INTEND TOSPREAD THE INVESTMENT OVER APERIOD OF TIME. OVER HOW LONG APERIOD SHOULD I SPREAD THEINVESTMENT OF THIS AMOUNT INORDER TO OPTIMIZE RETURNS IN THELONG RUN (10 YEARS)?

Ali Mallick, by email

Shailesh Kotechareplies

It’s a gooddecision tospread your

investments overa period of timewhen you have alump sumamount to invest.This way you canlower the risks

and average out your cost ofacquisition over a period of time. Youshould first put the whole amount, Rs4 lakh, into a liquid scheme of a goodfund house and then set up asystematic transfer plan (STP) to oneor more equity schemes of the samefund house. I would suggest youdivide your Rs 4 lakh into 12 monthlySTPs, which is about Rs 33,333 permonth, so that each month thisamount is taken out of the liquidscheme and invested in the equityscheme(s) that you have selected.Since your time horizon for investingthis amount is 10 years, I wouldsuggest you invest 60% of the money(Rs 20,000 per month) into a large capequity scheme and the balance 40%(about Rs 13,333 per month) into amid-cap scheme. After you remaininvested till the end of the ninth year,please remember to slowly transferthe corpus that you have in the equityschemes into a liquid scheme. Thisway again you will lower your risks toyour equity portfolio from a suddenslide in the stock market in the 10thyear of your investment. In the lastyear, even if the stock market slides,your total corpus will be hit much lessthan if you wait to redeem the wholeamount at the end of the 10th year.

STP: An STP is a process in which afixed sum of money from one schemeof a mutual fund house is transferredto another scheme of the same fundhouse at fixed intervals. In your case,the STP will be from a liquid schemeto two equity schemes.

Shailesh Kotecharuns Clarity Agencies, Amreli, Gujarat

While investing through an SIP, at what NAV theinvestments are made? Is it at a fixed NAV or it variesthrough the SIP’s tenure?

Abhinav Chaitanya, by email

Swatantra Kumar answers: When you investin a mutual fund scheme through an SIP,

the investments are done at the net assetvalue (NAV) on the day each investment is

made. It is not done at any fixed NAV. Forexample, if you have a monthly SIP of Rs 5,000 in

an MF scheme which is done on the 5th of everymonth, then your Rs 5,000 will be invested at the

NAV of scheme that is declared by the fundhouse on that day. Say if the NAV of the

scheme on April 5 is Rs 20, you will get 250units of the scheme while if the NAV

rises to Rs 25 by December 5,you will get 200 units.

Set Financial Resolutions In The New FiscalTrack expenses, review portfolio on a regular basis for a smooth investing experience

CASE STUDY

Have a contingency fund,adequate health cover

DEMYSTIFIER

Can a tax saving mutual fund scheme, that is Equity Linked SavingsScheme (ELSS), be used to create a retirement corpus? Financial planners and advisors believe this is one of the best and the most

cost-effective solutions to creating a corpus for retirement. Here are the some aspects of the same:

In the business world, therearview mirror is alwaysclearer than the windshield.”

Warren Buffett, celebrated investor, one of

the richest persons in the world

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NEXT EDITIONApril is the month when alarge number of people gettheir annual bonuses. In ournext edition we will discusshow to invest this lump sumamount for long term wealthcreation

ELSS FORRETIREMENT CORPUS

Rs 500: Minimummonthly

investment

No maximum investment limit

1.5%-2.75%:Cost per annum

Up to Rs 1.5lakh:

Tax savingsper annum

under Section80C of Income

Tax Act

Mukund Seshadri

Naresh Pachisia

3 years: Lock-in fromthe date of investment

for tax benefits

100%: Of thecorpus can

be withdrawnafter the

lock-in period

Nil: Tax liability oncorpus if

withdrawnafter lock-in

THE TIMES OF INDIA, MUMBAI TUESDAY, APRIL 5, 2016 21