Cafemutual speaks to another couple of successful IFAs to find out how they are managing their personal finances in these volatile times.
Rajaraman Kumbeswaran – IFA from Chennai
Outlook for equities and debt market for 2012 – He feels that the Indian markets will remain volatile as we are dependent on FII investment. “Our economy is dependent on foreign investments, therefore we need to wait and watch how the global markets move.”
Short term debt funds will perform as they did last year. Interest rates won’t be going down soon, he feels; therefore he sees a good opportunity lying in this segment for the next six months.
Broad Asset allocation – He usually allocates his assets in equity (60percent) and debt, gold (40 percent). He believes that people should have debt class in their portfolio because it helps them to earn regular income.
He has a moderate risk appetite because of his age but he reviews his portfolio once in six months. He has continued all his investments in this volatile situation.“This is a golden opportunity, so I have continued my investments and even made fresh investments in the last three months.”
Changes in your strategy in the current situation – “I am a global investor; I am shifting my money from developed countries to developing countries. Besides that I haven’t made any other changes.”
Do’s and Don’ts for investors:
Do’s
- You should divide your financial goals into two categories – short term and long term
- For short term investments, park your money in fixed deposits, bonds and debt market; for long term, you should go with equity and real-estate; If you are not too comfortable with equity, use SIP as your weapon to enter the market
- You need to believe in equity market because there is no other product which can beat inflation and give you returns
Don’ts
- Don’t put all your money in equity because you should have some spare cash to invest in the market when it is low
Mukund Seshadri, IFA from Mumbai
Outlook for equities and debt market for 2012 – As far as debt market is concerned, interest rates are expected to come down as there is a good probability that inflation rates will move southwards.
In terms of equities, he feels it is a buy year and investing with a five year horizon is a very good bet.
Broad Asset Allocation – His investments are based on his financial goals. If they are long term in nature, he invests in equity. He makes changes in his strategy if there are changes in goal, income and expenses. “I don't make amendments in my strategy based on short term market conditions.”
He is a systematic investor and invests in a disciplined manner for goals above five years. For short term goals, he sticks to pure debt products. Mukund invests regularly irrespective of market movements. He says, “I believe every time is a good time. It is not timing the market but the time in the market which matters.”
When asked about his risk appetite, he says, “I fear when others are greedy, and greedy when others fear.”
Do’s and Don’ts for investors:
Do's
- Involve family in financial planning – The entire family together needs to work towards their financial goal, it’s a team effort
- Be clear about your goals – Returns is not the sole reason for investing;what people need to know is what has to be done with those returns
- Do avoid loans as much as possible – the debt trap is the worst kind of trap one can fall into;EMIs may end up being very burdensome. So it’s important that one does a good amount of savings before and pays off existing loans using a fixed return debt instrument so that he is loan free and can manage finances better
Don’ts
- Don’t time the market – investments have to be continuous
- Don’t save for tax benefit alone – investments done with the sole purpose of getting tax benefits cannot help achieve goals;exemptions and tax benefits are designed keeping the advantages of the country at large and not you in specific
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