Query Corner

INVESTING

I want to invest Rs 80,000 in gold funds for the long term. Is this a good time to do so? Which funds do you recommend? Also, Do I get tax exemptions for investing in gold funds? - M.D. Dove, Bengaluru
Gold prices have gone up significantly in the past few years. However, there has also been some healthy correction in the past few months. Of course, if you're looking at gold as a long-term investment, then anytime would be right to get some exposure to the precious metal. We suggest you invest through a systematic transfer, wherein you park the amount in a floating-rate fund and transfer it to a gold mutual fund on a monthly basis over 12-15 months. This will ensure that you are purchasing across the market cycle, thereby averaging your cost. Unfortunately, you do not get tax exemptions for investing in gold funds.

I sold some property recently and received Rs 50 lakh. Where should I invest this amount to earn 5-7 per cent interest per month? - Saritha Salil, Thrissur
With a target of 5-7 per cent per month, you are looking at returns of 60-84 per cent per annum. This is highly unrealistic. You should expect a reasonable return of 10-15 per cent p.a.. Further, align your investments with your financial goals, such as retirement, constructing a house etc. We suggest you build a diversified portfolio using avenues such as mutual funds, bonds, deposits, structured products, ULIPs, etc., depending on your risk-return profile. If you are planning for retirement, then start with a higher allocation towards equity in the initial years and reduce it over the years as you approach retirement. Further, since you have sold property, which you had held for over 3 years, then it makes sense to re-invest the sum in a residential property. This could be given out on rent, which would also give decent returns.

I require a Rs 5 lakh personal loan for 5-7 years. My monthly income is Rs 14,000 and I have Citibank credit card with a Rs 2.31 lakh limit. Am I eligible? - Hema Ramachandran, New Delhi
As per bank rules, you will be eligible for a personal loan with an EMI between 35-65 per cent of your monthly salary. Taking a moderate 50 per cent of your current income and the current interest rate of 15 per cent for 5 years, you should be eligible for a loan amount of Rs 2.9 lakh.

My annual salary is Rs 4.9 lakh and I invest through two SIPs of Rs 1,000 each, apart from an insurance plan of Rs 35 lakh. I have a young child. Where should I invest to build a corpus for my child's marriage and to plan for my retirement? - Shahshwat Pathak, Korba
For your child's marriage, you can consider a child plan, which offers the 'waiver of premium' benefit. This works best if the child is younger than 5 years. In addition, you can start an SIP in a gold ETF, which you can redeem and buy gold (some plans also provide equivalent amount in gold). For retirement, we suggest you to use multiple avenues. You can consider debt mutual funds, corporate or Government bonds, fixed maturity plans, equity mutual fund SIPs etc. It is important that you arrive at a suitable debt-equity mix to align investments with your risk-return profile.

The lock-in period of my PPF account is ending soon. However, I want to extend it for another five years. How much money can I withdraw now to ensure that the account continues for the next five years? - Vishal Srivastava, Mumbai
You are permitted to make one withdrawal every year from seventh financial year, subject to certain conditions (amount not exceeding 50 per cent of the balance at the end of the fourth year immediately preceding the year of withdrawal or at the end of the preceding year, whichever is lower). After the initial 15-year period, if you choose to extend the account and maintain the balance, you can withdraw the entire amount at once or in installments. If the money is withdrawn in installments, you cannot make more than one withdrawal a year. If you continue to deposit money, you can withdraw up to 60 per cent of the balance at the beginning of each extended period (block of five years).

MUTUAL FUNDS

I am 29 years old and unmarried. I want to build a retirement corpus by investing in funds that deliver returns of 14-17 per cent per year. Some SIPs that I have are: Rs 2,000 in Quantum Long Term Equity Fund; Rs 1,500 in Fidelity Equity Fund; Rs 1,500 in HDFC Prudence; Rs 1,500 in HDFC Top 200 Fund; Rs 5,000 in Nifty BeES and Rs 1,500 in DSP MicroCap. - Pradeep Sharma, Indore
You already have a good choice of funds. However, you can consider replacing Fidelity Equity fund with Reliance RSF Equity. You also have a prudent mix of equity funds across market cap and risk profiles. We suggest you invest in varied investment avenues to arrive at a prudent debtequity mix. You can also route a part of your Nifty bees investment into Gold bees. This will provide good returns during inflationary times. You can buy them during dips.

I invest in the HDFC Top 200 fund and now wish to start a SIP in another fund for the long term. Which one would be the most suitable? Should I consider the ICICI Pru Dynamic Fund or the ICICI Pru Focused Bluechip Equity Fund? - Aparupa Sarkar, New Delhi
ICICI Pru Dynamic fund has had a longer tenure in the market. However, given the recent uptick in bluechip funds, the ICICI Pru Focused Bluechip Equity fund has performed well on a 1-year basis. You could also evaluate ICICI Pru Discovery fund, which is also a preferred stock within the ICICI Pru fund house.

Anil Rego, CEO, Right Horizons, will tackle financial planning issues and Satkam Divya, Business Head, Rupeetalk.com, will answer questions on Banking. Log on to www.moneytoday.in to submit your questions.

HOME LOAN

My father has a home loan of Rs 21.5 lakh against an Urban Improvement Trust lottery plot. I am the guarantor and also pay the EMI. I recently got my name included in the registry. Is it possible to add my name as co-borrower to avail tax rebates? -Vineet Goyal, Kota
Yes, you can add your name as a co-borrower for the loan. However, if the loan is for a plot and not a house, then tax benefits do not apply as rebates are not available for land loans. However, if you have taken a housing loan for construction on that plot, you can avail of tax benefits.

I already service a home loan but wish to invest in a commercial property. Can I get a loan for this? I own some land, which I can use as collateral. -Abhijeet Rawat, Dehradun
You can have multiple loans, provided you have repayment capacity as assessed by the lending institution. Banks and HFI's do provide loans for buying commercial property. For example, HDFC will finance a commercial property for a professional. For example, loans will be given to doctors for clinics.

I am repaying a loan of Rs 20 lakh for a house I will get in August. However, I now want to buy a parking lot and basement area, for which I will have to pay Rs 4 lakh. How can I get the extra amount? -Chandni Kher, Mohali
For the extra amount, you can apply for a top-up loan, which is subject to certain conditions. You also need to have the necessary repayment capacity, as assessed by the lending institution.

Renu Karnad is the Managing Director of Housing Development Finance Corporation. She will answer queries on home loans.