Financial planning: MFs seem to be a better option, says Kartik Jhaveri

Mutual funds is a better route to move forward with, asserts Jhaveri

I am 37 and have a five-year-old daughter. I want to invest for her education as well as for her marriage. The time horizon, therefore, is 15 years plus. Would you advise to opt for an unit-linked insurance plan (Ulip)? My agent says that they are now as good as mutual funds. I have even shortlisted a plan. Need your advice before I put money in it.

Ulips have become cheaper for sure. However, historical records of performances are still largely skewed in favour of mutual funds. Also with a mutual fund portfolio, the possibility of seamlessly allocating across various capitalisations and asset classes is a huge advantage. As of today mutual funds seem to be a tried-and-tested option and a better route to move forward with.

I retired in March from a government job with a corpus of Rs 72 lakh. I have already invested in a house worth Rs 35 lakh. I don’t need the remaining Rs 37 lakh for a few years as my pension is sufficient. I may need it in the future when my pension is unable to keep pace with rising prices. How can I invest the money for future use?

The very important question is for how many years will you not need to dip into your investment corpus. If you have five to seven years in hand, then I would suggest that you have 60-65 per cent of exposure to equities. This you should do strictly via a systematic transfer plan route. This way you will be ready to combat inflation 10-15 years later. Once you start utilising your investment corpus, consider paring down the equity exposure to as much 15-30 per cent or lesser.

I had invested in an under-construction property early on. The construction is moving very slow. I have an option to exit at a small loss as prices have not appreciated much. Should I sell the property and invest in mutual funds?

Considering that this is your investment property, it might be a good idea to move out of this as the returns via a mutual fund portfolio would be much higher over the next 10 to 20 years vis-a-vis investment in property. As cities grow, mature real estate investments are likely to yield about 8-9 per cent on an yearly basis.

I have not renewed my systematic investment plan of Rs 10,000 in an equity-linked savings plan that I invested last year as I am uncomfortable with the current market levels. Instead, I have been investing the money in a liquid fund. I will wait for the markets to correct and then do a systematic withdrawal plan. If markets don’t correct, I will start investing from October for the next six months. The investments will remain in the fund for a long time. I understand that I am timing the market. But I am doing it in a planned manner. What do you think of the strategy?

Don’t time the market. Rather continue disciplined investment versus financial acrobatics. Perhaps you may have just started investing and that’s why you are over-enthusiastic and also feel that you have the time to do this. Over time, when you have a large portfolio, this perspective will change. The portfolio may be sold and/or restructured once in five-seven years from the point of view of profit-booking and not in the manner that you are proposing. For now,  build up your capital using the SIP mechanism without interruption. There is a lot of merit in disciplined investing.

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The writer is director, Transcend Consulting. The views expressed are the expert’s own. Send your queries to yourmoney@bsmail.in