Below is the edited transcript of his answers. Also watch the accompanying video.
Caller: I can invest Rs 20,000 per month. I want to earn around Rs 20 lakh in a time period of seven to eight years. I have investments in LIC, fixed deposits and NSC, and I have two dependents. How should I allocate the money?
A: Basically you already have a lot fixed deposits. So for Rs 20 lakh, that is, if you want to invest around Rs 20000 for a period of 10 years, I would suggest that you invest in diversified equity or even in top-capital equity. Essentially, you already have lots of debt schemes. I would recommend you do one of these two or three funds - Franklin India Bluechip, HDFC Top 200, Birla Sun Life Frontline Equity. You can pick and choose. This Rs 20000 could grow depending on the returns it could grow in 10 years to anywhere between Rs 40-53 lakh at an assumed return of around 14%.
Caller: I can invest Rs 10,000 per month and am looking at investment through an SIP. My goal is Rs 10 lakh in five years, and I have no dependents. How should I allocate the money?
A: You don�t have any dependents then possibly you don�t really need life insurance. You may need other kinds of insurance in terms of health or possibly disability insurance that you should seek. Separate advice but in terms of getting Rs 10 lakh for five years, when your period of investment is five years, a pure equity investment is not something that we would suggest. I would tend to suggest a balanced fund where about 70-75% is in equity and about 25-30% would be in fairly highly rated debt. This Rs 10000 per month will roughly give you, assuming a return of around 12.9% for five years, about Rs 8.5 lakh. If you want to get Rs 10 lakh, you should do Rs 12000.
Recommended funds are HDFC Prudence, you can do Reliance Regular Saving Fund � the balanced option or Birla Sun Life 95. The Rs 10000 or Rs 12000 that you decide to put in, I would suggest you spread it only over two funds and do not take all the three. You can pick and choose the two or three that you want.
Q: Would it be a safe assumption that if I am able to save Rs 10000 per month now its quiet possible that three or four years from now it will naturally scale up to maybe Rs 12000-13000� sheer inflation and perhaps the natural progress of things. Should one assume that when one has a goal of Rs 10 lakh five years down the line?
A: The point there is when he wants to increase his investment by Rs 2000 at that time, the period is only two or three years. And that time to invest in a balance fund would be a little more risky. As your goal comes nearer, you want more debt and much less equity. In fact, for a two-year horizon, it would be difficult to recommend equity. It will have to be pure debt instrument. If it is next year, he can still consider balanced fund but if it is after that then he should look at debt.
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