Tuesday, February 17, 2009

Shall I take another Insurance?

VEERU wrote :
Hi Srikanth,

I get a chance to see u r blog http://goodfundadvisor.blogspot.com. It
gives me good information related to the investment.
Please advise me on my investments. I am 32 (Male). I am having 2
kids. 1st KID 4 years and 2nd KID 2 months old.

My Investments:

I am paying nearly 1 Lac rupees towards an Insurance(Jeevan Sree +
endowment) for me+wife +1st Kid for every year. I have invested 1 Lac
rupees in Shares directly. Since Market is down and value also come
down. I am planning to keep them for long term. My concern is one of
friend suggested me insurance for 2nd Child "TATA-AIG Maha life Gold"
Policy where i need to pay 1 Lac per year almost 12 years.

After that every year till his life 1 Lac per year. After, all i went
thru u r blog i am planning to think my friends advice. I am not
interested in that. I am planning to switch to mutual funds + SIP.
Please suggest me which funds will suit to me and I can invest 5K to
7.5K per month in SIP. Totally these investments for long term use

Thank you,

Dear Veeru,
Paying 1 lac annualy, suggests to me, that you are already sufficiently insured. Of course, it can concluded only when I know your annual expense. The thumb rule says, One should insure for about 10 years of annual expenses. suppose your annual expense is say about 2 lakhs, then you should insure for 2 lakhs * 10 years == 20 lakhs.
And for Insurance, Term Insurance is the Best. The charges are very very low. Now that you already have Jeevan Shree + endowment, go for further insurance only if you feel you are underinsured. And go for only Term Insurance.
My advise is give the "tata aig Maha life gold" a miss and say Tata to further Insurance.

I feel sad to see that your investment is down, it is of course expected, after the Big Correction that has happened. You have to keep them for Long Term, there is no other option. (All shares we buy, if it falls, automatically becomes Long Term Investment!!!)
Your mind veering towards Mutual Funds is but natural. Mutual Funds are the best avenue for Investments. They are transperanct, flexible, and give Best Returns among all the Asset Classes.
You can consider investing your 5k in the following funds which I feel should give you Above Average Returns.
1000 * 1 in Birla Sunlife Equity Fund (1000) (Investing via Century SIP will get you upto 1 lac Insurance Free)
1000 * 1 in DSPML Top 100 Fund (1000)
500 * 1 in DWS Tax Saving Fund (500) (Free Life Insurance of 5 times your investment is added Bonus)
500 * 1 in Fidelity Equity Fund (500)
1000 * 1 in HDFC Prudence Fund (1000)
250 * 2 in Reliance Natural Resources Fund (500)
250 * 2 in Sundaram Select Focus Fund (500)
This portfolio will have sufficient exposure to Large Cap, diversified Equity Fund and 1 Theme Fund (Reliance Natural Resources Fund)
Keep investing through sips.
Do review your investment every 6 months or so. Allow your funds to work by staying invested for long and reap the rewards.
Best of luck,
Srikanth Shankar Matrubai.

Visit http://goodfundsadvisor.blogspot.com for More Detailed Mutual Fund Advise.

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