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Evaluating Insurance

Evaluate the life insurance cover you need, rather than valuing it based on the premium you pay….

I am a 33 years old and earn Rs 70,000 per month. Since the last seven months I have started investing Rs 15,000 every month in five funds; DSPBR Top 100 Equity, HDFC Top 200, Reliance Regular Savings Equity, ICICI Prudential Discovery and DSPBR Micro Cap. I have been regularly investing in PPF with Rs 70,000 each year, have three life insurance policies for which I pay Rs 50,000 a year and have health insurance for myself, my wife and our three-year old son. Are my investments good?
- Susmit Majumdar

Schemes  Category  Rating  3-yrs ret (%)  5-yrs ret (%)
DSPBR Micro Cap Mid & Small Cap **** 18.15 NA
DSPBR Top 100 Equity Large Cap **** 15.47 19.13
HDFC Top 200 Large & Mid Cap ***** 21.30 20.59
ICICI Prudential Discovery Mid & Small Cap **** 25.29 17.58
Reliance Regular Savings Equity Multi Cap **** 16.14 22.58
Returns as on June 27, 2011 Ratings as on May 31, 2011

You have constructed a well diversified portfolio which is made up of good performing funds that have a proven track record and performance history. These are all highly rated and a good investment. With the multi cap and mid- and small-cap fund accounting for majority of your allocation; you have built and aggressive portfolio which has its share of risks that you should be aware of. Currently you are investing 21 per cent of your income and maxing the PPF investment every year, which is an assured return scheme with tax benefits, you should consider investing in tax planning mutual funds as well to get tax benefits and also the advantage of equity investments to create wealth.

Having adequate life and health insurance is crucial; evaluate the cover you need instead of valuing your insurance cover based on the premium you pay. As you have time on your side, you should consider increasing your equity investments to get the advantage of long-term investing and power of compounding that equity investments bring. This way you will be able to create a substantial corpus which will help you with the financial goals for your family.

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