Swathi Financial Planners

Frequently Asked Questions FAQ

Q: Why does one need a financial plan?

A: A family needs a financial plan to meet its financial goals without any hassles. A financial plan by nature has to be crystallized taking cognizance of the various risks - both general and specific.

Q: Is Systematic Investment Plan (SIP) an effective savings tool?

A: Yes, without doubt. To give an illustration, if one would have contributed Rs.10,000 per month for the last 17 years in Reliance Growth Mutual Fund, the corpus today would be Rs.2.7 crores, a whopping return of 27% CAGR. We recommend every breadwinner especially self-employed ones to build their corpus through SIP.

Q: Do mutual fund schemes only invest in equity shares?

A: No. The general misconception is that mutual fund schemes only invest in the stock market. To clarify, mutual funds are only a vehicle to invest in various asset classes like equity, debt, gold and real estate. Thus, there a variety of schemes which invest across asset classes. Please remember, mutual fund is only a financial vehicle and not an asset class by itself!

Q: Should one merely consider tax-saving benefits while investing?

A: No. This is mistake that most investors make. They give the highest priority to the taxation part of the investment and invest in instruments which give tax-benefits. We believe that investment should done based on age, risk-appetite, time horizon and financial needs. Only when one finalizes the asset mix should one consider the tax benefits.

Q: How does one plan events which are well ahead in the future?

A: This is a very subjective exercise. One has to take into consideration factors like future income trajectory, risk appetite and inflation.

Q: Can one alter the SIP amount every month depending on the market direction?

A: Yes. This strategy is called as Value Systematic Investment Plan. Goldman Sachs MF (Benchmark MF erstwhile) offers this facility.

Q: How much should one invest in gold?

A: Gold should be used as a hedge against inflation. By itself, gold does not have any intrinsic value. Therefore, one should not invest more than 5-10% of the portfolio in gold.

Q: Why is that many advisors recommend term plan? What is its significance?

A: Yes. Most advisors advice term plan because it is a pure form of insurance. Its significance is that it gives a life cover at a very nominal rate as only mortality cost along with administration cost is charged from policy holders.

But it does not find favour with most individuals as a term plan does not return any amount at the end of the term.

Q: Are fixed deposits the best option when one wants to invest in a fixed horizon-assured return product?

A: No. Most investors park their surplus money in fixed deposits when they have a fixed horizon say 6 months or 2 years as they consider it the safest instrument. Also the pre-determined rate gives them an added assurance

But there are alternative instruments like Fixed Maturity Plans (popularly known as FMPs) offered by mutual funds which are as safe (if not more) and are more tax efficient compared to fixed deposits.

Q: What value-addition will Swathi Financial Planning Services bring to the table?

A: Swathi Financial Planning Services customizes each portfolio/financial plan for client taking into account his/her requirements, financial background and risk appetite. We don't follow a "one- shoe-fits-all" approach. Also, while constructing a mutual fund portfolio, apart from just taking into consideration the performance history of the fund, we also take into account a host of parameters like sectoral diversification, fund manager history and stock level exposure. And most importantly, honesty and timely service is our motto!