Indians are increasingly opting for an exotic holiday in India and abroad.
Thomas Cook India, a leading travel related finance company found that people spend between Rs.35000 and Rs.60000 per person on domestic holiday and between Rs.1 lakh and Rs.5 lakh per person on foreign holiday.
This creates a huge opportunity for IFAs to plan for the holiday of their clients. Experts say advisors should plan vacation of their clients in such a way that it does not take a toll on long-term financial goals.
We spoke to a few advisers to understand how they plan for vacation of their clients and which category of schemes they recommend.
Vinod Jain of Jain Investments believes that advisers should go with the mix of equity funds and debt funds to plan for vacation. “Advisors can recommend liquid funds if a client plans for a holiday within a year or so. Else, you should suggest a mix of equity funds and income funds if your client wants to go after three years. In my view, investors should deploy 50% of corpus in equities as it can help them get attractive returns. Debt portion will take care of downside risk.”
Nisreen Mamaji of MoneyWorks Financial Advisors recommends balanced funds to clients if their time horizon is between 1 and 3 year. “Investors can invest in ultra-short term funds if they plan to travel within a year. If the time horizon is between 1 and 3 year, they can go for balanced funds to get better risk adjusted returns.”
However, a few advisers believe that creating a corpus for holiday depends on how clients want to put money i.e. lumpsum or SIP. Nagpur-based Ranjit Dani of Think Consultants believes that investors should invest lumpsum amount in liquid funds if they plan to go for a trip within a year. They can consider putting 70% corpus in income funds and 30% in pure equity funds if the time horizon is up to 5 years. “If the time horizon is over 3 years but less than 5 years, income funds can give better returns compared to liquid funds. Similarly, equity portion can give an additional mileage to the portfolio through better returns.”
For SIP, Ranjit suggests that investors should put 90% of SIP amount in debt funds and rest in equity to get better returns if the time horizon is between 3 and 5 years. He recommends 50-50 (equity-debt) asset allocation if time horizon is over 5 years.
