Financial Planning: Gaurav Mashruwala

I am 26. I save about Rs 20,000 monthly (take home pay = Rs 42,000). My investments are: money back plan = Rs 10, 000 annually, term plan = Rs 45,000 yearly, unit-linked insurance policy (Ulip) = Rs 25,000 annually, two balanced funds = Rs 10,000 each via SIP, stocks = Rs 50,000 (not invested in the last one year) and an index exchange-traded fund = Rs 20,000. Is there a need to restructure my investments? That is, is there a need to exit any of these and consider other options or instruments giving better returns? I want to start my own firm in 8-10 years. I have no dependants. 
You have not defined your financial goals. In the absence of any specific ones, my recommendations are general. First priority should be given to creating a contingency reserve. Set aside funds equivalent to about three months' expenses in fixed deposits linked to your savings account for emergencies. Next,purchase health insurance. Currently, you do not have any financial dependants. Therefore, technically, there is no need for life insurance. However, once you have a family, life insurance will be needed. It is recommended that you purchase this in the form of term plan worth Rs 35 lakh to begin with. The surplus left after completing all the recommendations should be deployed in equities, as your financial goal is about a decade away. Invest in equities via mutual funds. And, about two-three years prior to the actual requirement of funds, transfer the requisite amount into debt instruments.

I am 45, earning Rs 1.15 lakh a month. I have been considering investing in real estate for sometime, as it is a high-return avenue. I want to buy a flat in my home town, Cochin, as an investment. This is mainly to diversify my portfolio, which comprises equity holding of Rs 5 lakh, and debt (bank deposits + provident fund) worth Rs 10-12 lakh. Why don't financial planners advise diversifying through real estate? 
Recommendations of financial planners are based on the financial goal, current income level, types of expenses, assets and liabilities. Any advice given without considering income, expenses, assets and liabilities should be considered fractured. Real estate from an investment perspective should be dealt with caution. While real estate investment does yield good returns in the long run, it does have its demerits. First, it requires a substantial corpus. Second, it is illiquid and indivisible. Therefore, it is important to be cautious before investing. Often, the entire asset side gets skewed in favour of a single, illiquid, indivisible piece in the balance-sheet. Further, buying and selling of real estate is tedious. Therefore, you are requested to consider your financial goals, funds requirement, composition of assets and ability to enter-exit real estate before investing in this asset.

The writer is a certified financial planner.
The views expressed are his own. Send your queries to yourmoney@bsmail.in