The Wealth Manager’s Picks

Mukesh Dedhia’s Top ChoiceMukesh Dedhia is a CFP and works with G&B Vision, a Mumbai-based financial planning and brokerage firm. Dedhi...

Mukesh Dedhia’s Top Choice
Mukesh Dedhia is a CFP and works with G&B Vision, a Mumbai-based financial planning and brokerage firm. Dedhia heads the planning division of the firm. Here is what he likes:

A. Insurance
People usually mix up ‘insurance’ with ‘investments’. How many people are aware of the right insurance coverage for themselves? They would know the premium they pay and the number of policies they have, but not the risk cover. Hence, the importance of ‘adequate insurance’ is lost and the issue of affordability is confused with the priorities for the family. Insurance, as a concept, is bought when it is not required to make it affordable and not when there is trouble. Insurance is also to be bought only for a ‘financial asset’ not an ‘emotional asset’. Therefore, life insurance should be on the life of earning members only and for investments, strategic investments should be done for the family as a whole. I recommend TERM INSURANCE, which has only death benefit and not survival benefit. Go for a longer term, since the probability of death increases with age. Go for the leading insurance companies, since insurance is a long-term contract and among the leaders go for the most cost-effective. If two companies have similar costs, choose an agent on whom you can depend to give proper service during the whole span of the policy. I like the following:

Unit Linked Plans
As an investor, wouldn’t you like to have flexibility about the company, the fund manager and the philosophy of the fund? You can have this only with mutual funds. If insurance and investments are separated, life becomes very easy. I would only choose a term policy for insurance.

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B. Low risk fixed income schemes
The parameters in selecting a scheme would be safety, liquidity, returns and taxation. The selection of scheme for each individual would differ, based upon their own priorities. However some of the schemes worth considering are:

ICICI Prudential

HDFC Standard Life

The first two schemes also give tax advantages under section 80C

C. Mutual Funds
They can be broadly categorised as Equity, Debt and Hybrid.
Equity. This can be categorised as Index Fund, Diversified Fund and Sectoral Fund. Within a diversified fund you can have large cap, mid-cap, large plus mid-cap in a certain ratio or large plus mid-cap with flexible proportions. Again you have funds following either growth or value or growth plus value philosophy. Within value you have schemes investing in high dividend yielding stocks. An ideal portfolio would be a diversified fund having a larger proportion in large cap stock schemes and a smaller proportion in mid-cap and still smaller proportion in small-cap stock schemes to give that extra kicker to the returns but with extra risk. The portfolio should have both growth and value-based stocks. Some of the schemes I would recommend are :

Large-cap Funds: Franklin Templeton Bluechip, HDFC Equity Fund, HSBC Equity Fund, Reliance Vision, Sundaram Growth

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Mid-cap Funds: Franklin Templeton Prima, Reliance Growth, Birla Mid-Cap, Sundaram Select Mid-Cap

Value Based Funds: Templeton India Growth Fund, Prudential ICICI Discovery, HDFC Capital Builder, DSP Equity Fund , Tata Pure Equity Fund

Dividend Yield Funds: Birla Dividend Yield Fund

PPF 8%
NSC 8%
Post Monthly Income Scheme with Recurring Deposit, yield is around 9.5%
Senior Citizen Scheme 9%

Debt. Debt Funds can be categorised as Income Funds and Government Securities Funds. Within that you have funds with varying maturities to suit each individuals’ needs. Also you have short-term and long-term floater schemes. In times of rising interest rates, it is better to concentrate on floater schemes. Look at schemes from Prudential ICICI, HDFC, Kotak, DSP Merrill Lynch
There are also hybrid schemes that offer a combination approach mixing asset classes like equity and debt.
• Within Hybrid schemes you have two types. One which is equity dominant and another is debt dominant:
• In equity dominant schemes, I would recommend HDFC Prudence, DSP Balanced , Tata Balanced
• In debt dominant schemes, I would recommend Prudential ICICI MIP , HDFC MIP, DSP Savings Plus, Birla MIP, Tata MIP

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Disclosure: We have tie-ups with agents of all major insurance companies and AMCs. The recommendations are based on both returns and risk along with other factors