D URING periods of ex-treme exuberance (likein gold) or pessimism(like in equity) in the as-

set prices, investors tend to changetheir investment strategy based onhearsay, or hype around a product oran asset class and end up losing op-portunities to make money in thelong term. The investor today isspoilt for choice with options ofstocks, fixed maturity plans, equityfunds, quarterly investment plans,liquid funds, fixed deposits, non-con-vertible debenture, gold and a lotmore. However, before one takes acall on any investment option, aholistic view of the portfolio and therisk appetite needs to be taken inview along with consideration of thetax treatment. The returns vary de-pending upon the inherent risk ofthe asset class, time horizon and riskappetite of an investor.

EQUITY MUTUAL FUNDSFor investors having medium to longterm horizon (more than 3-4 years),equity mutual funds can be a goodbet, according to the experts. Someof the top performing funds havegiven annualised returns (in a sys-tematic investment plan) in excess of30 per cent in the last 3 years andabove 20 per cent in the last 5 years.What has been constant in the last 3-5 years has been equity marketvolatility. However, top equity mu-tual funds have been able to beat thevolatility and give consistently goodreturns during the same period. Forthose sitting on the sidelines waitingfor the equity markets to ‘bottomout’, Alexander Treves head ofinvestment, India, Fidelity Interna-tional suggests “the best way to beatstock market volatility is throughregular investing, or the systematicinvestment plans, wherein monthlyinvestment amount tends to be low.Longer term investors pay anaverage price for units over time andthis helps beat volatility.”

DEBT FUNDSDebt funds are a good option for riskaverse investors or those that have ashort term horizon. For very shortterm — say 90 days — quarterly in-vestment plans or QIPs present agood option which offer about 9 to9.5 per cent pre-tax returns. Forthose with a slightly longer time-horizon, income funds and fixed ma-turity plans can be a good option.“With the end of the interest ratecycle, income funds would do partic-ularly well. The other option isactively managed debt funds wherea fund manager takes the call on the

duration, type and timing of thepapers that the fund invests into”,suggests Suresh Sadagopan, CEO,Ladder7 Financial Advisories.According to the experts, if the needfor liquidity is more than 3 yearsaway, it is better to be in equity thanin a debt product.

FIXED DEPOSITS AND NCDSIn 2008, fixed deposit rates rangedbetween 5-6 per cent compellingretail investors to look at otherinvestment options to earn higher

returns. However, with doubledigit FD offerings from banks,which is relatively secure, retailinvestors are increasingly lookingat them as an attractive investmentoption. This, coupled with marketvolatility, also explains the minimalretail participation in the last oneyear in the equity markets. Nonconvertible debentures (NCDs) onthe other hand are offering up to 2per cent above the FD rates. Ex-perts advise factoring in post taxreturns of various investment op-

tions along with the relative riskthey carry. An investors would dowell to check the ratings of anNCD before locking one’s money.

GOLDDuring periods of excessive infla-tion, market turmoil, deflationaryshock, or war, gold has beenviewed as a form of insurance andrefuge. Gold has generally exhib-ited negative or very low correla-tion of returns with almost allother asset classes. Post US down-grade and the subsequent impacton world indices, money has beenmoving into gold taking it to his-torical highs. With the volatility inthe equity market, many retail in-vestors want to move to gold in theexpectation of better returns, espe-cially with the marriage seasonstarting in next 3 months duringwhich the gold demand goes up.Gold has given over 16 per cent re-turns since July 1 this year. How-ever, experts have a different takeon this. “Do not go overboard withgold now. Portfolio exposure togold must be restricted to 15-20per cent. Correction in the pricesof gold might come anytime. It willbe a smart strategy to liquidatesome portion of your gold holdingsand move into equities,” saysJayant Pai, VP, PPFAS.

REAL ESTATEThose looking at investing in realestate would do well to wait a littlelonger as according to the experts,there might be a correction in theproperty prices in the near futureand the upside looks limited.However, those looking at buying aproperty for their end use must nottry to time the market or the interestrate cycle and go ahead with thepurchase, say experts. HarshRoongta, CEO, Apnapaisa suggests,“the end users who have identified aproperty and are planning to buy itthrough a home loan must not waitfor the interest rates to come downand go ahead with their purchase.Once the interest rates come down,the floating rate would adjust ac-cordingly. However, look at buying aready to move property as a lot ofprojects are getting delayed due toproject funding issues that develop-ers across India are facing.”

TIMING THE INVESTMENTThe cardinal mistake which manyretail investors make is to time theirinvestments, especially into equitymarkets. Davind M Darst, in hisbook ‘The art of asset allocation’says “many investors have a ten-dency to overrate their investmentacumen, the probability and/orprecision of their forecasts, thelikely values of future outcomes,and the dependability and worth oftheir financial decisions. Quite a fewinvestors prefer the apparent com-fort of investing along with massopinion and consensus thinking.”

It is a common phenomenonthat the retail investors typicallyenter a market only in the last legof any rally and sell off when theyactually should be buying. It will aprudent strategy to keep the focuson long term growth and keepinvesting patiently. ◆

ritukantojha@expressindia.com

TheIndianEXPRESSwww.expressmoney.in

28MONDAY I AUGUST 15 I 2011

yMoneyEXPRESS

■ TAKING WINGS

The best advice I got...1) Winning is always a team effort, it’sthe team which wins, individuals con-tribute towards a common goal. Aspirefor team growth, cooperative effortsand effective associations, and successis bound to be yours. Stay focused, havefaith in yourself and your team, demon-strate flexibility, be among the first onesto anticipate change.

2) Integrity and loyalty based on mutualunderstanding always pays, being trueto oneself is the basis for becoming trueto everybody else. Organisations areliving organisms, in which people live,breath, develop, inspire as well as getinspired; therefore one should never

ABOUT ME

MY BUSINESS

NUMBER CRUNCHING

SHYAM PANDEYAvitus

AVITUS was conceived to establish aleadership position in lifestyle prod-ucts’ market(s) through promotingbrands like LoCUS and Sorrel (bothregistered trademarks held with Avi-tus) and making a mark in the globalfashion scene. Discerning customerswill get a taste of our unique brandexperience. These brands will betrend setters and will encompass her-itage, as well as contemporary de-signs and styles. Our basic frame ofthought procedure is reflected in ourtag line - We Create Elegance. We be-lieve that our products are creating amark of elegance, undoubtedly it willbecome more evident as we pene-trate the world markets. We plan toensure that our product quality nevererodes, even if we have to incurhigher costs.

Name Shyam PandeyAge 28Hometown Akbarpur/DelhiFamily background First gen entrepreneursMore than 1 company? YesEducation MBA (JIMS Delhi)Former employer Thomson Prometric

(now ETS Prometric)Favorite book/movie Book: Autobiography

of a Yogi, Think & GrowRich, Alchemist

No. of employees : 6No. of locations : 1Turnover : Below

R 5 crProfits : R 75 lakhPrimary source ofinitial funding : Friends and

selfRaised institutionalcapital? : Not yet

lose focus of people, for people are or-ganisations, and all structures and net-works ultimately are meant for people.

3) Negative posturing and mindsets arestumbling blocks to success. Success isbased on experiencing all thoughts andinputs, but filtering them through thelenses of efficiency and productivity.

The defining moment…After the launch, I visited a store at oneof most prestigious malls in Delhi andwas told by the sales staff, people arebuying the product with an image of amajor foreign brand being launched inIndian market. It gave us confidencethat we are on track

What keeps me awakeat night…The dream of creating a thriving businessconglomerate in the fast-moving businessenvironment, which could empower me tocreate a philanthropic system to serve theneedy in years to come.

I thought I would give up...There were moments when the going gottough. I could overcome them by beingfocused and flexible, creating a win-winsituation for the parties concerned, andluckily, life/people showed their trust in me

My word of advice for others...● If the dream is strong enough, facts donot count.

● Things that matter the most must neverbe at the mercy of things that matterthe least. ◆

MY GAMEPLAN

National Entrepreneurship Network, anon-profit organisation that supportshigh- potential entrepreneurs,con-tributes to this weekly feature

Company Name : Avitus(first companyfounded)

Founded in : 2009Headquartered in : ChennaiCompanywebsite/URL : www.

avituslifestyle.com

Industry : Fashion/RetailStage of the company : Scaling upSource of idea : Discussion

NAME: AMOGH DESHMUKH,32RESIDES IN: MUMBAI

PROFESSION: BANKERN E T A N N U A L I N C O M E

(R20LAKH)OTHER DETAILS: WIFE SUPRIYA, 31, HOMEMAKER, SON

RAGHAV 3, AND DAUGHTER ROHINI, 3 MONTHS

STATUS & GOALSHEWANTSTOBUYAHOLIDAYHOMETHISYEAR.HISMAINGOALSARE: EDUCATIONAND

MARRIAGEOFBOTHCHILDREN,PLANFORACOMFORTABLERETIREDLIFE

NEEDEDA financial planthat can fulfill hisgoals and provide asteady income afterretirement.

R13,000NETMONTHLYSURPLUS

PLAN BY: KIRAN TELANG,CERTIFIED FINANCIAL PLANNER,

MEMBER OF THE FINANCIAL PLANNERS’ GUILD, INDIA(www.fpgindia.org)

For expert guidance on your financial planning email us your details atexpressmoney@expressindia.com

EXPRESS CLINIC

OBSERVATIONS

He is heavily invested into real estateand has multiple liabilities. He shells outRs 70,000 a month on EMIs and has com-mitted savings of Rs 48,000 per month.

FINDINGSEMERGENCY FUND:Balance in savings bank is Rs1 lakh. He has setaside Rs 16 lakh in FDs and RDs of differenttenures.

HEALTH INSURANCE:

R 3 LAKHcover provided by employer for self, spouse andtwo children. There is no personal health insur-ance cover. Employer provided cover is grosslyinadequate.

LIFE INSURANCE:16 traditional life insurance policies, one ULIPand a term plan of Rs 5 lakh. Total risk coveravailable from all the policies Rs 14 lakh. Thetotal premium outgo is Rs 83,000 per year. Inaddition there is an employer-provided groupterm insurance of Rs 25 lakh.INVESTMENTS:There are two flats of total value Rs 1.6 crore.One is used by Amogh’s family and another byhis parents.RETIREMENT:There is no focus towards retirement planning.LIABILITIES:Total loans outstanding are Rs 42 lakh. EMIspaid are: Rs 35,000 for home loan, Rs 9,000 forvehicle loan, Rs 26,000 for personal loan.

RECOMMENDATIONSEMERGENCY FUND:Maintain Rs 1 lakh inflexi-savings account. Keep about Rs 2 lakh inultra short term mutual funds.Express Tip: Always keep 3-6 months ofexpenses in ready to use form. Do not forgetto include EMI’s in the expenses. Too muchmoney in emergency fund can affect portfolio

returns.

HEALTH INSURANCE: Im-mediately buy personalhealth insurance cover of atleast Rs 5 lakh each for selfand spouse and Rs 3lakh for

each child. This should cost around Rs 25, 000per anum.Express Tip: Funds required for hospitali-sation can lead you to debt crisis if money isshort. Keep personal health cover apart

from that provided by the employer to tideover conditions like change or loss of job.

LIFE INSURANCE:Surrender or make paid -up (based on thesurrender values), all policies except the termplan and the ULIP. Buy a term plan worth Rs2.4 crore. This should cost about Rs 60,000per anum.Express Tip: Death of sole income earnercan jeopardize the whole family. Always in-sure before you invest.

ACCIDENT INSURANCE:Amogh should buy an accident insurance policyof Rs 1 crore. This should also cover temporary

total disability and perma-nent partial disability.OTHERINVESTMENTS:Liquidate existing FDs andRDs to repay the outstand-ing personal loan of Rs 12

lakh. This will free up Rs 26,000 per month.Keep balance Rs 4 lakh in liquid fund/FMP com-bination as emergency fund. Continue the ULIP.At a 12 per cent expected return, this shouldyield about Rs 23 lakh in 2020.The total amount available after dealing withthe life insurance policies and currently runningRDs, closing personal loan and including thesurplus from income will be Rs 77,000 permonth.Increase investment in PPF to use the entireavailable limit of Rs 70,000 per annum. Start RDof Rs13,000 per month for 12 months to pay forPPF, Term Plan and Health insurance.Raghav’s Goals: Start SIP of Rs 20,000 permonth for education and Rs 2,500 for weddinggoal.Rohini’s Goals: Start SIP of Rs 35,000 per monthfor education and Rs 2,000 for wedding goal.Retirement: Start SIP of Rs 8,000 to supportretirement. There is only Rs 4,500 available inthe current situation. Increase this as salary in-creases. Other components will be corpus fromPF, PPF, ULIP investments and sale of existingsecond property.The goal of buying a holiday home cannot befulfilled currently. A decision should be taken infuture after salary increase after all the othergoal requirements have been met.Express Tip: Mistakes, if done have to becorrected. Do not hesitate to book losses if itimproves your future prospects.

CONCLUSION

Financial Planning provides you thepath to maintain right balancebetween present & future lifestyle.A thorough budgeting exercise,proper management of expenses andright asset allocation can help youmeet financial goals.

MONTHLY INCOME (Post Tax)

R1,66,000TOTAL EXPENSES

R1,53,000

GOALSIN ORDER OF PRIORITY

SON’S EDUCATION(Assuming inflation 10% by 2025)

CURRENT VALUER 30,00,000

FUTURE VALUER 1.14cr

DAUGHTER’S EDUCATION(Assuming inflation 10% by 2028)

CURRENT VALUER 30,00,000

FUTURE VALUER 1.51cr

SON’S MARRIAGE(Assuming inflation 8% by 2033)

CURRENT VALUER 10,00,000

FUTURE VALUER 54,36,000

DAUGHTER’S MARRIAGE(Assuming inflation 8% by 2036)

CURRENT VALUER 10,00,000

FUTURE VALUER 68,48,000

RETIREMENTPLANNING (2037)

(Assuming inflation at 6% p.aand life expectancy 80 years)

MONTHLYEXPENSE LEVELR 35,000

FUTURE VALUE(2037)

R 2,58,000

CORPUSREQUIRED

R6.83crore

■ INVESTMENTS

Make the most ofmarket volatilityDo not try to time the market. It is prudent to keep the focus onlong-term growth and invest patiently says Ritu Kant Ojha

WEALTH CREATORSScheme 3

Name YearMagnum Emerging Biz 34.06Religare Mid N Small Cap 31.30Birla Sun Life MNC 30.68Religare Mid Cap 29.79HDFC Mid-Cap Opportunities 29.77

WEALTH CREATORSScheme 5Name YearIDFC Premier Equity 20.50Birla Sun Life MNC 19.63ICICI Pru Discovery Inst I 19.02Birla Sun Life Div Yield Plus 18.28UTI MNC 18.20

TOP PERFORMING DEBT FUNDSScheme Name 3 Year 5 YearICICI Prudential Gilt Investment PF 15.09 12.14Birla Sun Life GSF Long-term 13.30 8.90Canara Robeco Income 12.08 10.57JM G-Sec Regular Plan 11.91 8.83JM Short-term Reg 10.46 9.20

FIXED DEPOSITSBank 3 Year 5 YearAndhra Bank 9.40 9.00SBI 9.25 9.25Kotak Mahindra Bank 9.25 9.25PNB 9.25 9.00Canara Bank 9.00 9.00

Returns (SIP) annualised, as on August 9, 2011(Source: Value Research)

(Source: Apna Paisa)

THINKSTOCK