Recurring deposit to generate monthly pension

Recurring deposit to generate monthly pension

We have an article which highlights how to use RD for generating a retirement corpus.
However, we can use RD to also generate a monthly pension.

How?

Create a RD for 10 years (1000 per month). Note that you need to create a fresh RD every month for 12 months.

Assumptions:

• The investor is 30 years old and needs to retire when he/she is 60 years old.
• 10 year RD rate is 8.25%

Plan:


Create a RD for 10 years (1000 per month). Note that you need to create a fresh RD every month for 12 months.





Thus at the end of twelve months, the monthly outgo will be 12000 per month.
At the end of ten years, for the next one year, you will get a pension of 186201 per month.

One can put this amount in any other long term investment option (like NSC/FD etc) and restart another RD scenario for the next 10 years.

 Just my thoughts. Do share if you think there are better avenues.

Children education/marriage corpus

I have heard many people talk of wanting to plan for their children's marriage and/or education fund.
The simplest option is:

• Get a term insurance (in case of any casualty, your family and child will not suffer)
• Invest in a good MF (either of equity large/diversified/index or sector funds) for long term (80%)
• Invest in good Debt MF (Long Term/Short Term/Gilt/MIP) (20%)

There are folks who would rather want a risk free investment.
For them the plan would be

• Get a term insurance (in case of any casualty, your family and child will not suffer)
• Open a PPF account and invest 1.5L yearly
• Open a Sukanya Samriddhi account (in case of a girl child) and invest 1.5L yearly
• Invest in good Debt MF (Long Term/Short Term/Gilt/MIP 
• NSC
• 10 year cash certificates and zero coupon bonds
• FD

Whatever you may plan, don't procrastinate.

If you have better options, would love to hear them out.

Never buy Sector Funds

We have always heard of folks in websites/TV mentioning that one should look at diversified MF for investment.

One thing I always hear/read is that almost everyone has one cardinal rule - NEVER INVEST IN SECTOR FUNDS.

Q. What are SECTOR FUNDS?
A. SECTOR FUNDS are funds that invest in a specific sector (e.g Banking, Pharma etc).

Q. Why shouldn't one invest in SECTOR FUNDS?
A. The common thinking is that one cannot time the markets and no one can guess who will ride in the next bull run. There have been bull runs dominated by IT, FMCG, Banking (last one) and Pharma (recently 2014-2015).

Thus, since one cannot predict which sector will be the leader, investment in SECTOR FUND can go awry.

Contrary to the popular belief, I believe ONE SHOULD INVEST IN A SECTOR FUND.

Huh? Why?

Because, a well diversified MF will be heavily dependent on the stocks it picks.

If one is invested in a SECTOR FUND, he/she gets the following advantages:

• In the BULL RUN, you would get max returns (e.g in the last bull run, MFs like Reliance Banking fund were outperformers).
• FMCG fund will always come under defensives.
• Thus, one would have a benefit of one defensive and one out performing fund.

I believe in the following (and I could be wrong):

• Banking has to grow with time as the economy improves.
• Pharma has to grow with time with our ever growing population
• FMCG will be a strong defensive fund to provide anchor to your investments (expect good dividends)
• IT is a dark horse and with stronger dollar, could be the surprise in the pack.

The only one SECTOR FUND that evolves doubt is INFRASTRUCTURE FUND. However, with Mr Modi's 100 smart city plan, INFRA should get a push and this could also become a performer.

So, apart from your normal investment, I strongly believe SECTOR FUNDS should be invested in.

Your thoughts?

Pipavav acquired by Reliance Infra

Was always a big supporter of Pipavav. It seemed to be a big idea (defence ship etc).
Was hopeful of a strong promoter infusion (L&T,Munjals etc).

Today's news is that Reliance Infra has taken over Pipavav
http://www.moneycontrol.com/news/press-release/rel-infra-acquires-pipavav-defenceoffshore-engineering-co_1320890.html

The stock price has crashed 10% since the open offer is at 63 Rs.

However, would like to see how this pans out.

I still have high hopes on Pipavav since to make something of this scale requires a lot of time and money.

They have done the tough part...lets hope they grow big..