Suresh Sadagopan, Certified Financial Planner- Business News

Suresh Sadagopan, Certified Financial Planner

  • November 3, 2015  
  • |  
  • UPDATED   11:52 IST

 It's the festive season, you are already reading reports on records spends by people, we are all splurging out, especially with all the discounts offer. What's the advice that you have for people to know how much to spend and don't be reckless. What would be the three or four tips that you would give people who are going out there and spending  right now?

People spend during Dusherra and Diwali. So we are fine with that. The only point is we will prefer people to stay and spend within the budget and whatever they have budgeted like 30-40-50 thousand whatever, they should tend to stay with their budget. The good point at this point of time is that there are lot of offers which are going on this time. Probably, people can save 15-20-25% on whatever they wanted to buy. The only word of caution is that they should not go overboard because there are so many offers tempting these days. So,  one should refrain from going overboard on some of these offers and buying stuffs which would not be a prudent thing to do. So apart from that go ahead splurge, party have a great time.

One of the points , I want to focus on this edition is the fact that while we have talked in the past about what are the kind of financial products that you can invest in. I think it's also important from time to time keep looking at your investments. That doesn't mean you look at them on a daily basis. You can have a situation where a particular scheme or a particular fund is not doing well and you just keep sitting on it and don't move or act on it, you can actually end up losing money. We saw recent instance which was a one of, which was to do with one particular fund and it's investment in a certain company's debt which went  a little tospy- turvy and investors lost money. So, the larger question is how one should looking at their investments, whether it's equity or debt?

I would say, good frequency would be once in six months or once in year for long term corpus. Not looking at the portfolio is not an option. Once in six months is fine and once in 1 year is fine for most people who are looking at building a corpus for next 20-25 years. So, normally as financial planners we look at clients portfolio once in six months. We find that to be perfectly fine. The only word of advice I would like to give people when they are looking at portfolio is that they should not look just at the returns, which that particular fund is giving. There are two parts to it: One is don't look too closely at only the returns given by specific schemes. You have to look at the overall portfolio return because I believe the portfolio has been considering in a particular way to take care of your risk tolerant levels and your specific needs. So, just because one scheme is doing not well, may be the fund manager has taken a certain call and it has not played out completely. As long as you have faith in the fund house, as long as you have faith in  the fund manager, you have to give a few quarters. If there is one or two quarters of underperformance that doesn't call for discarding that scheme and getting into a new scheme. So, long term thinking is what required in terms of even portfolio reviews.`

While when we talk of equities, we talk of five years and going up as you mention up to 25 years or even more but when it comes to debt, the time frame is certainly not that long . You do keep enhancing your portfolio but you don't really go into one particular debt scheme for five years and ten years. Because the tenure that is shorter should you be reviewing it perhaps more sooner than six months?

I wouldn't  say that at all because most of the people will be investing in medium and long term products. So, when we talk about medium term products, most of the people are talking about may be 3-5 years in medium term and longer term or income funds are essentially beyond five years. So, if we look at that as the time frame there is no need to review that  very frequently. Unless of course there are jerks, like you had earlier mention. If there are going to be untoward happening which are in certain companies which form of a part of a debt portfolio, then of course one has to take a call on that may be more frequently than six months. But that is probably going to have once in a while. Normally, I would say six month interval is a good enough interval for a reviewing this. As far as shorter term funds are concern, the problems are not really that very magnified in the shorter term. Like for example: Ultra short term funds, the universe available to fund manager is very similar I would say. Except for those actually going to credit play strategies. More or less all the people have similar kind of portfolios. In the shorter term essentially you want to meet shorter term goals. May be 6 months to 2 year kind of goals. So those things do not actually require frequent reviews in my opinion, 6 months is more than adequate.