There are good mutual funds and then there are more good mutual funds. Have you invested in most of them and don't know what makes up for a good mutual fund portfolio?

How do yu know that you have not invested more than is necessary in most of these MFs? Should you portfolio have a mix of tax saving MFs, investment in systematic MF plans, large cap/mid cap/small cap MFs?

What should be your ideal investment horizon if you are investing in MFs for your children? Are unit linked insurance plans good for long-term investments?

In a chat with Get Ahead readers on February 20, financial planning expert Vetapalem Sridhar answered these and several other queries related to mutual fund investments, financial planning and how to achieve financial freedom for you and your family.

For those of you who missed the chat, here is the transcript.

rs123 asked, i am 39 yrs old and having around 24 lacs in mf and 15 lacs in blue chip stocks. i had taken a home loan of 30 lacs for my house. should i prepay with selling some mf and stocks. i am able to pay from my salary the home loans. taken for 20 yrs. i am survived by wife and kid - 7 yrs old. looking at a corpus of 1 cr by another 10 yeras. pl advise.

Vetapalem Sridhar answers, Hi! It does not make sense to sell equities during phases of correction, to prepay ur loan. If u can continue to pay the H/L from ur salary then continue to do so. Ur existing 39L in equity and the further 20K p.m. into equities for the next 10 yrs should roughly grow to more than 2 cr (assuming an annualised growth rate of 15%). The above funds selected make the portfolio very aggressive. Would suggest that u should replace Reliance Growth by a fund like HDFC [Get Quote] Growth/ Sundaram Growth Fund.

Deep asked, I am 28 years unmarried working in Software firm for past 4 years My portfolio 1 lakh (50k yearly) in ICICI [Get Quote] Prudential Lifetime super 10k one time in HDFC Tax Saver (ELSS) 5k one time in SBI [Get Quote] Magnum Tax Gain (ELSS) 1 lakh in PF LIC [Get Quote] Jeevan Anand 20k Yearly (17 year policy) Immediate Plan: Money for marriage. Should i continue ICICI, HDFC Tax Saver and SBI Tax Gain thru SIP?

Vetapalem Sridhar answers, Dear Deep, U have already committed urself for a substantial amt to insurance premiums. If 3 yrs r over for Jeevan Anand, then would suggest that u surrender this policy and get back the surrender value. ICICI u will have to pay the 3rd installment. Do not make the mistake of taking a Personal Loan for ur wedding. U can stop all investing if necessary to collect funds (in a bank) for ur marriage. This things should have been planned for well in advance.

Claud asked, Hello Sir, I am 25 years old and Single. I earn about Rs 40,000 per month. I would like to know if it would be wise to buy a flat in Mumbai this time, given the real estate boom in the last few years. I have looked at various options and I would have to take a home loan which I would have to repay by paying an EMI of Rs 27,000/- So please kindly advice, buy a house now or wait for later???

Vetapalem Sridhar answers, Dear Claud, it is very difficult to say anything about the valuation of real estate prices. We cannot say with certainty where it will go in the near future, though it has corrected or remained stagnant for quite some time. If this is a house where u plan to stay, then it does make sense to buy it within the next few mths itself. As u r single, probably u should be able to afford to pay the EMI. With time ur salary should increase and in a few yrs time u should be in a comfortable state.

shekar asked, Dear Sir, I want to know whether it is good to start investing in retirement planning such as LIC retire and enjoy plan at early age?

Vetapalem Sridhar answers, Hi Shekar, it is DEFINITELY gud to start investing at an EARLY Age. As then u can have the advantage of compounding on ur side. But it may not be the best option to invest money into the LIC plan suggested by u. It would make more sense for u to do a SIP into a diversified Equity Mutual Fund.

ANANDA asked, HI SRIDHAR, I AM DRAWING RS 13K/PM. I HAVE TO PLAN FOR MY DAUGHTER'S IS STUDYING IN 4TH STD AND WANT TO CHANGE HER SCHOOL AFTER 3 YEARS IE FOR HIGH SCHOOL. I ALSO HAVE RS 9K IN PRU ICICI TAX GAIN FROM NOV 06 TO MAY 07. I HAVE SIP SBI MAGNUM TAX GAIN RS 1500/-PM RELIANCE TAX SAVER 500/-PM (FROM APR 2007 ONWARDS) I HAVE INVESTED IN SBI BALANCED RS 5K AND HDFC T 200 RS 5K. WHAT MORE CAN I SAVE TO ACHIEVE THE ABOVE PURPOSE. THANX AND REGARDS, A. ANANDA RAO BENGALOORU.

Vetapalem Sridhar answers, There is no need to have so many tax funds. Just pick one and continue further investments in it. Over time u can add an aggressive fund like JM Emerging Leaders Fund as there is still 10 more yrs when u will need funds for ur daughter. I would suggest that u do a SIP into the funds from ur savings.

shk1 asked,  Sir, I have a corpus of Rs.2 crores. I am 39 years old, married with two kids. Appreciate if you could suggest an investment plan and an asset allocation considering my profile as a conservative investor. Is my corpus enough for acheiving financial freedom? Kindly advise.

Vetapalem Sridhar answers, Hi! Ur asset allocation would depend on a number of individual specific factors -- ur current cash flows, cost of current and preferred future lifestyle, no of dependants, risk profile, when major financial expenses r planned from ur side, objectives in life etc. U have not mentioned any of the reqd info to suggest u the appropriate asset allocation. If the 2 Cr that u have is sufficient to sustain u financially till u r alive, u would have achieved financial freedom!

suhas_k asked, Hi, Iam 26yrs old planning to invest around 20-22K pm to MF's. Currently i have invested HDFC equity(40K), DWS investment oppur (30K),SBI contra (30K), Franklin templeton flexi cap (40K), Franlkin templton India growth (30K), DWS tax saving (20K), SBI Magnum tax gain (10K), DSP ML Tax saver (20K). All Growth schemes Apart from this i have a 8L policy for LIC jeevan anand(21yr term,40K pa). I have more than average risk appetite as of now. Pls suggest which will be funds to invest in now?

Vetapalem Sridhar answers, Dear Suhas, U have already invested in a lot of schemes. Would suggest that u pick just one of the existing ELSS schemes and continue all further tax investments in it. The other funds seem to be OK, so continue to invest further amts into them. Would also recommend u to take a TERM Insurance Policy which gives u adequate cover.

neetu asked, is it advisable to invest in SBI tax gain (elss) for 10 yrs for greater returns? what shud be the tenure in ur regards ideally to invest for greater returns?

Vetapalem Sridhar answers, Hi Neetu, 10 yrs is a gud horizon to invest into equities. This does not necessarily mean that u should stick to the same fund for the entire tenure. U should evaluate the fund atleast once a yr. If it is underperforming its peers SUBSTANTIALLY, then there is a case to switch into a better performing fund. If u hold 5 funds, u should change one fund each yr. This would ensure that the portfolio remains fresh and the non-performing fund is weeded out. Even though SBI Tax Gain has done exceedingly well in the past, it has grown too large. Hence a fund like Sundaram Tax Saver or Principal Tax Savings Fund should be a better option.

ash asked, please suggest me the best five best mutual funds where i can invest for at least 10 years?

Vetapalem Sridhar answers, Dear Ash, today's best funds may not necessarily be tomorrow's best funds. Infact it is very difficult for funds to be consistent top performers. Focus on building a portfolio that is able to deliver above average returns as the chance of keeping on making such returns is very high. Plz go thro the link below where I have given pointers on how to pick gud funds. (How to select a good mutual fund -- A slideshow, click NEXT to read thro).

SHWETA asked, is taking an ULIP a wise decision, or shud I normally go in for a term/ life insurance?

Vetapalem Sridhar answers, Hi Shweta, if u r looking for pure risk cover, then it is safer to go for a TERM Insurance Plan. The chance of going wrong in this is quite low. In very few cases do ULIPs work out to be a better solution than a combo of TERM + Mutual Funds.

SD asked, i'm 26 yrs single. want to build my MF portfolio. Able to save under 80C. Plz list few funds. i hav shortlisted few. Reliance vision, regular saving fund, HDFC equity, JM emerging leaders, SBI contra plz advice?

Vetapalem Sridhar answers, For ELSS (Sec 80C) u can look at Sundaram Tax Saver or Principal Tax Savings Fund. U seem to be doing ur home work, the above funds picked by u work out into a gud portf.

sk asked, I have a disposable income of around 30000 which r the mf i should invest. I want a moderate risk strategy.

Vetapalem Sridhar answers, U should go for large cap/ diversified Mutual Funds if u have a moderate risk appetite. U can look at funds like SBI Contra, HDFC Growth, Reliance Vision, JM Equity, Franklin Bluechip, Templeton India Growth Fund etc.

Vilas asked, a financial planner advised me not to invest much in PPF since the returns are low comparatively & there may not be 8% returns in future as it is now? wat is ur say in this? PPF or MF?

Vetapalem Sridhar answers, Hi Vilas, I would agree with what has been suggested to u. PPF is a long term investment option (upto 15 yrs). With such a horizon, the option that has potential to deliver highest returns is equity. U should continue to invest the min. Rs 500 to keep ur PPF A/c active. The remaning money should be invested into a diversified equity Mutual Funds.

vijay asked, Hello!! Shridhar. I want to invest money for next 2 to 3 years. my present take home is 30k, I dont have any loans. my monthly expenses are 10k. I have to invest 10 k in ELSS funds @ which ELSS funds I should go for. secondly the rest 10k where to invest, and how much, in PPF, ULIP, Insurance, Mediclaim, FD ect. other than this I have 1Lakh extra cash which I want to invest for next 2 years. I have one daughter. the investment till now are, 15k in HDFC ULIP for daughter, 1 lakh LIC insurance for my self, 1lakh in FD & NSC. and 2 LAKH invested in mutual funds like Reiliance, sundaram select focus. also i have started 3 SIPs of 2000 each in RIL [Get Quote] regualar saving, RIL div power sector and Sundaram capex...thanks regards.

Vetapalem Sridhar answers, Hi Vijay, first take up an adequate TERM (cannot suggest how much as I don't have adequate info, maybe something like 25L) insurance cover. Then keep around 2-3L in FDs (contingency fund). Other than this invest only upto 1L each yr u/s 80C. Insurance, ULIP, ELSS etc would qualify under this. Other than this do a SIP in regular diversified MFs. Sector funds may not be such an ideal choice. Would suggest that u add funds like HDFC Growth, SBI Midcap, JM Contra to ur holdings.

chinmoy asked, Hi Sridhar, I am 34 years old. following are my financial details. Please advice if I need any change to this. Total Income after tax Rs.7.5 lakh/year SIP- Rs.8000( 3 diversified equity + 1 midcap) MF ELSS- Rs.38000 ULIP- Rs.44000/year total insurance cover Rs.140000 Home Loan - Rs.12 lakh, EMI Rs.11000 Car loan Rs. 2 lakh- EMI Rs.4500 PPF+ others - Rs.50000 Fixed deposit - Rs.150000 Financial goals - child education 16 yrs from now - Rs. 1200000 My pension- 20 yrs from now , Rs.10000000 Regards, Chinmoy.

Vetapalem Sridhar answers, Hi Chinmoy, At 1.4l u r highly under insured. Take an adequate TERM Insurance cover which will cover all ur liabilities as well as provide for enough financial resources to ur dependants in case something happens to u. Increase SIP amts to the funds that u already have. It would make sense to reduce investment to PPF a/c.

Jitendra asked, I am 37 yr married having two children elder is 9 yr daughter & younger is 3.5 yr old son. My take home is 28K PM, presently I am investing in MFs through SIP i.e. ICICI Infrstructure,HDFC Top 200,Sndaram Select Midcap, HDFC Equity, HDFC Prudence, DSPML opportunities, Fidelity Equity,Franklin India Flexicap all are of 1K PM except DSPML which is 2K PM. I have one UTI ULIP of 10K PA, Birla sunlife ULIP of 25K PA, Having some LICs of 30K PA. Still I am not satisfied rather I should say feels not secure for the future (education + marriges) of kids & post retirement life for me & my spouse. What you suggest at this stage?

Vetapalem Sridhar answers, U have invested in too many places. U need to take up an adequate TERM Insurance cover. consolidate ur holdings into 4-5 funds. It may also make sense to stop ur LIC policies in future.

Nisha asked, Dear Mr. Sridhar, I have read that at my age (30), I should have 30% debt and 70% equity component. If I structure my 1 lac tax savings such that 70K in ELSS and 30K in PPF, is that a good idea? Also, other than tax savings, I can also follow the same approach of 70K in ELSS/ Stocks and 30K in KVPs/ bank deposits/ gold? I want a simple strategy to save regulary. Please advice. My income is 5lac per annum.

Vetapalem Sridhar answers, Hi Nisha, wat u have read is something like a thumb (general) rule. All individuals are unique and their situations vary widely. So how can the same rule be applied across the board? U need to figure out an asset allocation plan that would best suit ur individual case and make a strategy accordingly.

A way of planning is this. Keep 3-5 mths worth of mthly expenses in ur savings bank. Then put away a chuck of money into a bank FD to take care of any emergencies. If there r any major expenses planned within the next 3-5 yrs time, collect this money into safe assets like short term debt funds/ Fixed maturity plans etc. All the other money that can be invested with the long term horizon can be invested into equities.

jj asked, sir, I am sure you know that Pension funds such as Franklin templeton pension fund or UTI pension fund are eligible for tax exemption in 80C. Is it totally for 1 Lak or is there a slab of 10,000. Is it makes sense to invest for 3 years in that and withdraw even though we incur exit load of 1-3 %. It has given returns of 15% and reducing the exit load and also the STT the returns will still be around 10% which is better than 5 years tax savings FD. Can you think whether this is better option for conservative investors who would like to take MF route for Tax exemption?

Vetapalem Sridhar answers, With a 5 yrs horizon it makes more sense to invest into a ELSS fund instead of the options mentioned by you. The returns from above funds are taxed, as they are considered as debt funds. So ur over all return would reduce further.

AS asked, Hi Sridhar, How would you rate my portfolio? I have invested for 10-15 years and would like to invest more down the road. Birla Mid Cap G -5% Birla Sun Life Equity-17% DSPML Equity Fund-18% DSPML TIGER-7% JM Basic Fund-6% Kotak Opportunities G-8% Reliance Power Sector-5% Reliance Vision-18% Sundaram Paribas Select Focus-5% Tata Pure Equity-11%.

Vetapalem Sridhar answers, Funds picked r gud, but it would be better if u consolidate ur portf to 5-6 funds over the next 2-3 yrs.

Rajaaaa asked, Sir, I am 35 years old, Daughter of 4 years, working in a non secure job. Can invest around 30,000/month. Please suggest if current investment is fine and also few good diversified mutual funds for SIP. A residential property to live. Another one fetching rent of 15,000/month, 7 Lakhs worth Fixed Deposit 50 Lakhs worth Blue chip stocks. 15 Lakhs in Reliance Growth, 10 Lakhs in Reliance Diversified Power Sector, 5 Lakhs in Reliance Vision, 15 Lakhs in DSPML TIGER, 10 Lakhs in DSPML Opportunities, 10 Lakhs in HDFC Equity, 10 Lakhs in HDFC Top 200, 10 Lakhs in Birla Sun Life Equity, 5 Lakhs in SBI Magnum Global Thanks Raj.

Vetapalem Sridhar answers, Hi Raj, U seem to be doing gud. As long as u r working u can afford to maintain an aggressive asset allocation. Would suggest that over time also build funds into debt. FMPs should be an ideal choice for tht. There r too many funds. U can imporve the funds held in ur portf. U can look at keeping one large cap, 1 diversified, 1 midcap and 1 small to midcap and probably a sector fund that u already hold.

ry asked, I am a single mother and have a 1 year old daughter. I have started earning recently and I can save 8000/-pm from my salary. how to invest wisely so that I can secure my child's education and future. Thanks.

Vetapalem Sridhar answers, Hi, plz read thro the following link, where i have dealt at length how to invest for children. It is a slideshow, click NEXT to read thro.

DivyaPradha asked, Hi, I have been investing in the following MFs for last few months. 1K per month in Reliance Vision, Reliance Growth, Sundaram Select MidCap, SBI Tax gain, Magnum Contra, HDFC Prudence, HDFC Equity, Birla Sunlife Tax, JM Basic. Please let me know, if my selections are okay?

Vetapalem Sridhar answers, The portf seems fine. Would recommend u to add JM emerging leaders fund instead of Reliance Growth and Sundaram Midcap to ur portf.

shuchi asked, Hi I am 28 yrs old. I have 2 ULIPs. Bajaj Allianz where I am paying a premium of 10k and Max New York Life where I am paying a premium of 30k. Should I surrender one? Does it make sense to hold so many ULIPs. Also how much should one ideally invest in MFs in a year to accumulate 5 lacs in the next 3 yrs. My salary is 5.5 Lacs per annum.

Vetapalem Sridhar answers, Hi Shuchi, cannot comment on the ULIPs as u have not mentioned the names of the policies. Would suggest u to take up a TERM Cover in case u need Insurance cover. Do not add any more insurance based investments. 3 yrs is too short a period to say wat returns u can expect from the mkts. So cannot suggest how much u should invest into MFs to accumulate 5L. Any money that u plan to use within 3-5 yrs should ideally not be invested into equities.

askbalancer asked, Good a/noon sir! I am doing full time MBA in singapore after abt 4 yrs IT related job in an MNC in India. My q is can I take an education loan here in S'pore from local banks (int rate is abt 3%) so that my savings can earn at least 7-9% post tax returns in INDIA? Do I need to inform back in India for RBI/ITax related issues? Thanks.

Vetapalem Sridhar answers, I'm not sure about how it will work. But if u hav savings in India, it would make sense to invest these savings and live of the money that u recieve from the loan in Singapore. Would suggest that u talk to a CA if u want to remit that money taken on loan into India for purpose of investing.

Dav asked, I think u hv not received my question so m re sending Hi Mr Sridhar, I m 25 Yrs and my CTC is 2.5 LPA I want to do saving, Till now I think I haven't saved anything. I started investing Rs.15000 PA in Tata AIG Assured II plan (Unit Linked Plan) from Nov 2006 and from last year I started investing Rs 1000 on Birla Sunlife through SIP. Kindly suggest where to invest so that I have enough till I am 30.

Vetapalem Sridhar answers, Pick 2-3 Mutual funds and start a SIP into them. U can look at options like SBI magnum Midcap, HDFC Growth, Reliance Vision, Sundaram Growth, JM Emerging Leaders Fund etc.

preetham asked, Hi sir, I am 24 years old and i am unmarried,I earn aboutn Rs. 52,000 per month I invested Rs 25 per month in equities since last one year. i have LIC policy of 10k per year. i have invested one 1 lakh yearly since last 3 years. last month my equity investment lost arount 40%. please do advice me whether shud i expose to equities this year as everybody assuming US going to recession?

Vetapalem Sridhar answers, Dear Preetham, Equity is a long term investment option. U should hav a min. 5 yrs horizon to invest into equities. U r still young and can afford to invest with a 10-15 yrs horizon. Falls in mkts r better times to buy stocks/equity mutual funds. If u hav a 5 yrs horizon there is no problem in adding further amts to ur equity investments.

madhuc asked, Dear Sridhar, Just two days back, I took a ULIP (HDFC Young Star Plus) for 25K for my 5 yr old daughter. But there was an article in rediff that ULIPs are waste as there is admin charges as wells as agents commision etc. Did I do a wrong thing by selecting a ULIP over ELSS? Pl. answer.

Vetapalem Sridhar answers, Dear Madhu, the ULIP taken by u will generate reasonable returns provided: 1. U continue to invest till the term of the policy (more than 10 yrs) 2. U select the growth option which has maximum equity exposure. This specific policy has very low costs from the second yr onwards, so stick with it. Do not stop the policy after 3 yrs as then it would be a very bad decision.

Ayan asked, Hi- I am married with a 7 year old kid. Our combined monthly income is 110k pm. HL EMI is 44k and car loan EMI is 9 k. Insurance premium is 10k pm. Household expenses are 25k pm. How to invest the balance 22k for the next 15 years so that I can retire at an age of 50 with the current expense level (inflation adjusted). Both of us are 35 now.

Vetapalem Sridhar answers, Based on info provide (which is inadequate), I can say that u can achieve Financial Freedom by ur age 50 yrs. Do a SIP in 4-5 Mutual Funds of the 22K with a 15 yrs horizon. First take up an adequate TERM Insurance Cover.

soumya asked, Sir, I am aged 38 now and CTC 4.65 lacs per annum. Carry home 30 K. 5 persons are dependent on me. Please Advice any suitable term plan for me.

Vetapalem Sridhar answers, U can take quotes from Metlife, Reliance Term Plan, ICICI Pru Lifegaurd WROP, SBI Shield. Pick the one that works out cheapest.

Ankur asked, Hi Sridhar, I have a CTC of around 6.5 lacs pa and my take home is around 40 K pm(exclusive of tax). I want to minimise my tax liability for next FY and I want to take a home loan for the same. Apart from Sec-80 C and other sections like HRA exemption. Are there any further ways to minimise my tax outgo? I am single and can save around 75% of my take home salary. Also I want to know rules of gift tax. Can i gift some amount to my grandparents and claim deduction on my taxable income? Plz help me to minimise my tax liabilities.

Vetapalem Sridhar answers, Hi Ankur, do not foucs on only saving tax. Try to focus on creating wealth. U cannot grow wealthy by saving tax, u can grow wealthly by wise INVESTING decisions. Wat u can gift someone is the post tax income that u get. U can reduce ur tax liability by taking a House loan.

Vetapalem Sridhar says, It was gud to answer ur queries...Hope that they help u take better decisions! Will catch up soon!