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Samraat

Samraat Jadhav  |2131 Answers  |Ask -

Stock Market Expert - Answered on Aug 16, 2023

Samraat Jadhav is the founder of Prosperity Wealth Adviser.
He is a SEBI-registered investment and research analyst and has over 18 years of experience in managing high-end portfolios.
A management graduate from XLRI-Jamshedpur, Jadhav specialises in portfolio management, investment banking, financial planning, derivatives, equities and capital markets.... more
Siddhartha Question by Siddhartha on Aug 14, 2023Hindi
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Is it advisable to invest in Corporate FD's like Bajaj Finance and Tamilnadu Power Finance and Infrastructure Development Corporation Ltd? Do they return the deposited money in case I need to withdraw it in case of emergency.

Ans: there are lockins and some period on which you buy the CFD's. Always check the rating before buying and ask your agent on the liquidity which will help you in redemption.
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
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Ramalingam

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Mutual Funds, Financial Planning Expert - Answered on May 07, 2024

Asked by Anonymous - Apr 23, 2024Hindi
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I would like to invest a Crore of rupees , for monthly income. I was thinking of a bouquet of Corporate FD's ( Shriram , Sundaram , Bajaj etc ) , LIC , Bank FD's and Mutual Funds. My question how safe are Corporate FD's ? Like Bank deposits have an Insurance cover for upto Rs 5 lakhs , are there any insurance for corporate deposits. How much is the safe amount to deposit in Corporate FD's. Any other investment you advice for a safe 8-9% return .Can i invest in Gold , without actually buying it ?
Ans: Investing a significant amount like a crore for monthly income requires careful consideration of various factors. Let's address your concerns and explore suitable investment options:
Corporate FDs:
• Corporate Fixed Deposits (FDs) offer higher interest rates compared to bank FDs but come with higher risk.
• Unlike bank deposits, corporate FDs do not have any insurance cover. Therefore, investing a large sum in corporate FDs may expose you to higher risk.
• While some reputed companies offer corporate FDs with stable returns, it's essential to assess the creditworthiness and reputation of the issuing company before investing.
• Consider diversifying your fixed income investments across multiple corporate FDs to mitigate risk, and limit exposure to a portion of your overall investment portfolio.
LIC and Bank FDs:
• LIC schemes like LIC Jeevan Akshay offer annuity options providing regular income for life, suitable for retirement planning.
• Bank FDs provide safety and liquidity, but interest rates are relatively lower compared to corporate FDs.
• For safety, ensure that your bank FD investments are within the limit of Rs. 5 lakhs per depositor per bank, covered under the Deposit Insurance and Credit Guarantee Corporation (DICGC).
Mutual Funds:
• Debt mutual funds, particularly low-duration or short-duration funds, can provide stable returns with relatively lower risk compared to equity investments.
• Consider investing in debt mutual funds with a track record of consistent returns and low expense ratios, aligning with your risk appetite and investment horizon.
Gold Investments:
• Gold can act as a hedge against inflation and provide diversification to your investment portfolio.
• You can invest in gold through Gold Exchange Traded Funds (ETFs), Gold Savings Funds, or Sovereign Gold Bonds (SGBs), which offer safety, liquidity, and convenience without the need for physical storage.
Other Investment Options:
• Consider exploring other fixed income instruments like Government Savings Schemes (e.g., Senior Citizen Savings Scheme), Post Office Monthly Income Scheme (POMIS), and debt-oriented hybrid mutual funds for regular income with relatively lower risk.
• Evaluate your risk tolerance, investment horizon, and financial goals before making investment decisions. Consider consulting with a Certified Financial Planner to develop a comprehensive financial plan tailored to your needs and aspirations.
In summary, while corporate FDs offer higher returns, they also entail higher risk. Diversification across multiple investment avenues, including LIC schemes, bank FDs, mutual funds, and gold investments, can help achieve a balance between safety and returns. Always prioritize capital preservation and risk management when structuring your investment portfolio for regular income.

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How to finish home loan faster
Ans: Paying off your home loan early while building wealth requires strategic planning. A parallel SIP in equity mutual funds can complement your goal by leveraging market growth over the long term. Here's a detailed approach:

1. Start a SIP in Equity Mutual Funds
Invest monthly in a diversified equity mutual fund for a period of 7+ years.
Equity funds historically offer higher returns over long periods, outpacing home loan interest rates.
Align your SIP amount with your financial capacity, ensuring consistency.
2. Time the Loan Closure with SIP Maturity
Use the maturity value of the SIP to make a lump sum prepayment towards your loan.
Ensure the investment horizon of the SIP is long enough to mitigate market volatility.
A 7-10 year SIP period can yield significant growth due to the power of compounding.
3. Continue Regular EMI Payments
Maintain your regular EMIs while running the SIP.
Do not compromise on timely loan payments to avoid penalties.
The parallel strategy reduces your loan tenure effectively when executed with discipline.
4. Focus on High-Interest Loan Years
Prepayments made during the initial years have the highest impact on interest savings.
Coordinate your SIP maturity during this time to maximise loan repayment benefits.
5. Leverage Tax Benefits on Both Ends
Claim tax deductions under Section 80C and Section 24(b) for home loan payments.
Equity mutual funds held for over a year qualify for long-term capital gains tax benefits.
Use the tax savings to either increase your SIP or make additional prepayments.
6. Step-Up Your SIP Amount Annually
Increase your SIP amount by 10-15% every year to match income growth.
A higher SIP contribution accelerates wealth accumulation for loan repayment.
7. Avoid Premature Withdrawal from SIP
Do not redeem SIP investments prematurely unless used for loan closure.
The longer you stay invested, the higher the growth potential.
8. Track Loan Tenure and SIP Performance
Regularly review your loan outstanding and SIP performance.
Align your repayment strategy with market conditions and financial goals.
9. Focus on Financial Discipline
Avoid new liabilities while managing your home loan and SIP.
Stick to a budget that prioritises both EMI payments and SIP contributions.
10. Plan for Surplus Investments
Channel any bonuses, tax refunds, or additional income into either SIPs or loan prepayments.
Small additional investments can significantly enhance your repayment capability.
Final Insights
Starting a parallel SIP in equity funds while paying regular EMIs creates a structured pathway to close your home loan early. Over time, the compounded growth from your SIP can ease the financial burden of a lump sum loan prepayment. This balanced strategy ensures financial growth and reduced debt simultaneously.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

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DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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