MONEY MATTERS

Investment

Pawandeep Singh: I am 44 and have `80 lakh in NRE deposit. I have a corpus of `1.9 crore that can be invested for the next 10 years and an apartment worth `1.3 crore, which will be sold within a year and the money will be put into liquid assets. I also have a term plan of `3 crore and substantial medical insurance. How should I invest to make sure that the amount I get can fund all my expenses after 10 years? Meanwhile, I will get a job or start a venture to meet my expenses, but I can't afford to lose the above corpus.

Ashish Shanker, Executive Vice President and Head, Investments, Motilal Oswal Private Wealth Management, replies:

Setting goals and having a well-thought-out approach are crucial for success and the same holds true for financial planning. In this case, you have a target that will take care of your expenses 10 years down the line and a clear idea of possible inflows. We also assume that dependents and milestones have been taken care of. You have no outstanding loan, own your house and have adequate insurance cover. All these are smart moves.

If you plan to start a venture, build an emergency reserve into liquid funds equivalent to expenses of 18 months, which would be the gestation period of the business. It will also ensure that the amount invested to meet your long-term objectives is not disturbed by near-term liquidity requirements. You are risk-averse, and we understand that too much risk is uncalled for. But a certain amount of equity exposure is vital to a portfolio's performance. Moreover, you have enough time, which will help mitigate equity risk. Therefore, investments in balanced funds will be appropriate. The blended equity and debt exposure will enable you to build the retirement corpus and ensure a smooth journey. Set aside the emergency amount and invest the rest (`1.9 crore + `1.3 crore - emergency fund) in a staggered manner over three to six months as and when the funds are available.

The corpus will grow further if you decide to put in part of your salary or business income. Investing in a few quality mutual funds with clear philosophies, which are managed by people with a strong track record, will be a prudent way to start. For the majority of your investments, you can opt for some balanced mutual funds such as HDFC Balanced Fund, Aditya Birla Sun Life Balanced 95 or ICICI Prudential Balanced Fund, through SIP. An estimate of post-retirement expenses, coupled with a smart investment strategy, can ensure a comfortable retirement.

Health insurance

Rajesh Parmar: To increase the cover of a health insurance policy which one is a better option - buying a top-up or increasing the cover of the existing policy or buying a new policy?

Antony Jacob, CEO, Apollo Munich Health Insurance, replies:

It is a wise decision if you are considering to increase the cover of your health insurance policy as it is important to be adequately insured. It is especially important now when medical costs are rising due to advanced healthcare technology. While increasing the cover, you must consider which category of health insurance you require and streamline the purpose it serves. Buying a new policy with benefits similar to the existing one does not provide any additional help as a cumulative bonus cannot be ported. Hence, a new policy should only be considered if it offers enhanced benefits or for better customer experience. Otherwise, look for a top-up plan that offers identical benefits as your base product in terms of sub-limits, co-pays, pre- and post-hospitalisation limits, waiting period and so on. It is beneficial because it gets seamlessly integrated with the existing policy and increases the cover limit. Plus, there is a premium advantage when you take a top-up on the base plan. However, the pre-existing disease waiting period is different in such cases.

Mutual fund

Rajeev Khera: I have been investing in Quantum Long Term Equity Fund for the past three years through SIP. Earlier, it delivered better returns than its benchmark and category. But this year, it has lagged in both areas. What is the reason? Should I stop the SIP?

Rohit Shah, Founder and CEO at Getting You Rich, replies:

Most mutual funds go through such cycles of underperformance. In this case, your investment period of three years and observation period of one year is too early to reach any conclusion. We have not noticed any major change in the fund attributes or style. One reason for underperformance could be the relatively higher level of cash holding by this fund. The fund is known to be conservative. The rolling returns for recent period and the long-term SIP returns indicate a satisfactory picture. So, we suggest that you remain invested and continue the SIP as well. It is difficult to have top-performing funds in your portfolio all the time. Focus on accumulating absolute returns that will eventually help you build the power of compounding in your portfolio.