Khota Paisa

SIP – The Silver Bullet?

Posted in Investment by khotapaisa on January 25, 2010

Today I was watching a program on a leading financial news channel. A viewer called up and asked his investment query to the guest expert. The viewer had 5 lakhs (if remember correctly) for investment. He had a time horizon of 5 years after which he needed 15 lakhs towards his father’s medical needs. He wanted to take low risk so as to keep the principal investment amount safe. He wanted to know how to invest the money. The guest expert advised the viewer to start a SIP/STP in equity funds (I guess in HDFC Top 200, Reliance growth & SBI contra). He also suggested that at a reasonable 15%, he won’t have 15 lakhs after 5 years. So, either the viewer needed to increase time-horizon or take more risk.

This forced me to think about the common misuse of the systematic investment plan(SIP). Nowadays, SIP is being used as a silver bullet. No matter what your financial needs & profile, you will by default be suggested to invest in equity thru SIP. In reality, SIP has no magical properties. It doesn’t make your equity investment safe. In the example above, given the investor need and time horizon, equity is not exactly what the investor needs – SIP or no SIP. For a 5 year horizon, equity is avoidable for safety seeking investors. In this case, equity becomes less suitable given the purpose of investment. These days SIP is being offered as a equity-with-no-risk (what else would you ask for) investment option. This is another worrying trend like the ULIP trend. Remember, there is no one financial products that fits all. And this applies to SIP as well. The fact that you are going to invest thru SIP should not have any effect on your decision to invest in equity. You should first decide whether you can/want to invest in equity. Once you have decided to invest in equity then you decide whether to go SIP or no-SIP way.

Choosing a Health Insurance Plan

Posted in Insurance by khotapaisa on January 7, 2010

With so many players offering so many health plans, choosing one can be a frustrating task. In general, there are certain parameters like premium, exclusions, coverages etc that you are expected to consider while comparing health plans. But believe me, even with all this information in front of you, you will find it difficult to choose a plan. To keep it simple, I would try to list out some important points which you should keep in mind.

1. Go through the exclusion list. Read it in full and see if any of it is relevant to you.  Just go thruough the list.

2. Pre-existing diseases should generally be covered after 1 year.

3. Go through the list of network hospitals in your city. The policy you choose should cover most of the reputed hospitals in your city or the nearest big city.

4. Always go for a family floater plan unless you are single.

5. You must opt for atleast 3 Lacs of coverage.

6. Check out about the claim settlement record of the company. For this you could talk to your friends who have claimed earlier under health insurance. Typically, you will be paying higher premium for companies with better claim settlement record.

7. With the earlier point in mind, don’t just go for the cheapest plan.

Retirement Calculator

Posted in Calculators by khotapaisa on January 4, 2010

Here is a tool to find out how much you need to save for your retirement. Please note that the expense you enter in the tool is your current living expense. But it shouldn’t include expenses that will not be there after retirement like EMI, premiums, school fee, expense on children etc.

Retirement Calculator (Opens in a new window)