Financial Planning: Malhar Majumder

I am 40 and have a daughter. I earn Rs 1 lakh per month. I have two moneyback policies for which I pay Rs 16,000 per month for 20 years. The cover is about Rs 20 lakh each. Are insurance plans good investment options? Additionally, I can pay another Rs 5,000 a month for investment. Where should I invest? And should I stop paying for one of the money back plans?
The thumb rule in insurance plans are for covering risk and they should not be mixed with investment. Since you have not furnished details, I cannot comment as to whether you can stop one of these plans. What you need is a more balanced portfolio of mutual funds, PPF and gold based on your goals. As your current investment is really skewed towards insurance policies, I would suggest you to take the help of a financial planner to design your asset allocation and not make adhoc investments at this time.

Considering your earnings, age and liability, your life coverage is grossly inadequate.

I am 23 and working. How important is it to have a defined goal for planning finances properly? And, how do I know if I should invest in equities or only stick to fixed deposits?
It is very important to set goals before we undertake any activity. Investing is also a similar activity which demands prior goal setting. You may fix short-term objective like “I will have X amount in the next three years” and keep on investing to achieve this. Also at your age, you may invest in equity-oriented mutual funds instead of fixed deposits.

Malhar Majumder
Director, Gliese Consulting