Investment options


Dear Sir/Madam,
I am 26 years old married person and working with a reputed company. My monthly take home salary is 28000 Rs. My saving rate is pretty high at 25K as I live in joint family. So I have constant incoming money which I can invest for different purposes. My spouse is also working but will be on leave for next six months without pay due to personal reason. Her per month salary is 14000 currently. There are some immediate requirements which are given below.
.1. Purchase of flat in Mira Road-approximate price will be 40 lakhs excluding the RR, SD and other expenses. In total it might go up-to 46-28 lakhs.
2. Purchase of insurance scheme which cover me, my wife, upcoming baby, my parents.
3. Fund for baby future requirements.
4. Investment in pensions scheme.
5. fund for emergency times.

We are looking for a long term home loan, integrated insurance cover, pension schemes and contingency funds. First priority will be Central Bank of India, State Bank of India for home loan and investment purpose and LIC for insurance scheme but if other good options are there, please advice.

Currently I have approx 4.5 Lakhs in bank saving account, Please provide the advice how to plan for everything, so that I can utilize the money in a better & effective way.

Suraj Rai


A good investment portfolio consists of a mix of equity as well as debt investment instruments. If you are comfortable in investing small amounts monthly, we suggest you to start investing in Systematic Investment Plans ( Mutual Funds) and in some RD ( Recurring Deposits ) of Post Office, which is a safe, debt investment instrument.

As MFs give more return, you can invest more into it, than RD. The ratio can be 70:30.

Also include some good insurance plans, preferably term plan with sufficient coverage, to cover up any risks. If you have not taken any health insurance, do have one without delay. If you are having a good health insurance, and is having a stable job, you need not keep Rs.4.5 lakhs in your savings account. You can invest a good portion of that amount in FD or in any other good scheme. Investing it in liquid funds, which would give you good returns and easy liquidity when you are in need of money.

Having a Child Insurance Scheme, and a retirement plan ( both ULIPs ), is advisable to separate investment for specific purposes like child’s education, retirement planning etrc. But a careful choice of plans with guaranteed returns is important, as there are a host of ULIPs to confuse any buyers.

You can rely on home loan for raising money for your home buying need, but make sure that your EMI is not crossing 40% of your monthly income, to be on a safer side. Also, banks fund only upto 85% of teh property value. So will have to keep ready with the remaining 15% beforehand, while starting your property hunt.


I have some lump sum money for investment. I am considering mutual funds or portfolio management service. Does PMs Offer any advantage over mutual funds?


PMS is best suited only is you have a lump sum money to invest and do not have the time to monitor your investment yourself. Even if you have a big amount of money, in case you cannot take the stress of losing your money, it is best to avoid a PMS. Mutual funds have a maximum cap limit on the amount they can spend on one stock or a sector. PMS can however shortlist top 10-15 companies of one sector if that is what you need making the investment more aggressive.


My office driver told me he is investing in a chit fund company. Are these even legal?


All chit fund companies in India are regulated under the Chit Funds Act of 1982. Various state governments have also drafted chit fund regulation guidelines to allow smooth working of chit fund companies. Any company offering a chit fund investment must be registered with the respective state government. So if he is investing in a chit fund company which is registered then of course it is legal. Each state government website along with the ministry of Corporate affairs publishes a list of registered chit fund companies so you can easily check if the chit fund company in question is legal or not.


Great and insightful blog.
Wishing you all the very best and happiness for the near future.


Hi Suraj,

First, you must start with creating an emergency fund. At least 6 months of your take home pay should be saved as emergency fund. Read this post for the same - Then, purchase a life cover for yourself and your spouse. Compare across insurance firms for the best policy - Investments in pensions schemes should be ongoing. Ensure that you save for your retirement every month. Read this post for more information - We suggest that you wait until you have your baby. You will have maternity expenses and other expenses for the baby. So, taking a Home Loan right away may not be advisable. You can use Fixed Deposits to save for your baby - You might need Rs. 5 to Rs. 10 lakh for your Home Loan down payment. Plan your savings so that you have enough for your down payment when you want to but the house.

BB Expert


Hi Reba,

A chit fund is a savings cum borrowings scheme, wherein a few people (known as members or subscribers) come together and invest a fixed amount every month for a fixed period. While the concept of chit funds has been very popular in South India for several decades, other states in the country have also adopted the chit fund concept in recent times.

Various State and Central regulations regulate chit funds in India. At the central level, the Chit Funds Act 1982 governs chit funds. Some states also have state-level laws. Registered funds are regulated and governed by law, but unregistered chit funds are not bound by any regulations. When fraudulent chit funds closed shop, several investors lost their hard earned money. It is therefore not advisable to invest in such unregistered chit funds.

Further, it is not advisable to invest in chit funds where the other members are unknown to you. Thus, the key to investing in chit funds is in choosing the right one.

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BB Expert


The good systematic investment plan consists of the mix of equity and debt investment instruments. Suppose you are comfortable to invest small amounts every month, then I suggest you invest in Kotak mutual fund, which is the safe investment plans. As systematic investment plan will give you more return, and you can also invest more in it, compared to RD.


Hi NMahesh,

There are three types of services that are usually offered by PMS providers.

Discretionary PMS – Here, the portfolio manager assigned to you will decide which investments to make and when to make them. This is similar to Mutual Funds where the fund manager will decide what to invest in and when to invest in them. There will be minimal customisation of your portfolio.

Non-discretionary PMS – If you choose this type of PMS, the portfolio manager will suggest investment ideas. You will be the one who will decide whether to execute them. You will also take a call as to when to execute them. The portfolio manager will then make the actual investments based on your decision.

Advisory PMS – Under this form of PMS, the portfolio manager will only suggest investment ideas. It is totally in your hands to decide whether to execute them. Apart from deciding when to execute the investments, the actual execution will also need to be done by you. This is the totally customised form of PMS.

Most of the PMS firms offer discretionary PMS services, including banks. There are only a few firms that offer all three types of PMS. Note that unless you have equity market or investment knowledge, it is best to stick to discretionary PMS. If you have knowledge and the time to look at your portfolio, you can choose either non-discretionary or advisory PMS.

Note that PMS doesn’t come cheap. Charges are obviously much higher than that of Mutual Funds. This is because SEBI hasn’t set any limits for charges for PMS, unlike Mutual Funds. According to SEBI, “a portfolio manager shall charge a fee as per the agreement with the client for rendering portfolio management services. The fee so charged may be a fixed amount or a return-based fee or a combination of both.” So, the cost structure provided by the PMS firm might be ambiguous. Note that these charges are not monitored by any regulatory authority. With trading costs being very significant, PMS charges might be high.

As you know, PMS is a high-risk product. The returns will become visible only in the long term. As historical data goes, genuine PMS products can only give you only slightly higher returns than Mutual Funds.

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