Alagappan Thenappan, Chennai based IFA
A client who had been investing regularly in mutual funds for a long time through me received a bonus of Rs. 5 lakh from his company. Given his faith in mutual funds, he wanted to invest the entire bonus in mutual funds instead of spending it.
We were having a conversation about his expenses and he told me that he had taken a loan of over 12 lakh and was paying an EMI of Rs. 20,000 per month. Since he was paying a lot of money in interest I suggested him to repay the loan first. Heeding my advice, he made a prepayment to the bank which reduced his interest outgo substantially. I also advised him to redeem his existing investments in mutual funds to prepay the loan to which he agreed. He has repaid his entire loan.
I could have accepted his request to invest Rs. 5 lakh in mutual funds but I did the right thing by advising him to repay the loan. Though I lost business because of this advice the client was thankful to me as he got out of the debt trap.
He still continues to invest through me and today owns two apartments which he has bought with the help of his investments in mutual funds.
Anita Kanbargi, Belgaum, Karnataka based IFA
In 2003, a private sector executive approached me to help him build a nest egg for his retirement. Since he used to spend a lot, he was worried whether he will be able to save enough for his future goals. He wanted to lead a comfortable retirement life without being dependent on his children. While reviewing his portfolio, I came to know that he had some investments in bank fixed deposits and PPF. These investments were not going to achieve his goal so I advised him to:
- Switch from recurring deposits to SIPs.
- Invest in tax-saving bonds for tax planning.
- Invest his idle cash in debt funds.
He followed my advice diligently and today he has accumulated a good corpus which is helping him enjoy his retirement. We have moved a part of this corpus to debt funds. He is withdrawing Rs. 4.5 lakh per annum from this corpus which is helping him live comfortably.
In fact, he flew to Australia twice to meet his son. This client is happy that he is not dependent on his children to look after him.