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D.Muthukrishnan (Muthu), Certified Financial Planner- Personal Financial Advisor

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Some basics

Posted by Muthu on August 7, 2015

1) Have an emergency fund of not less than 1 year of your expenses.

2) Insure: Term, medical, personal accident and fire insurance for your house.

3) Don’t use revolving credit on your credit cards.

4)Simplify: have two bank accounts, one credit card and one demat a/c.

5) Write a will.

6) Don’t borrow except for buying a house.

7) Ensure the value of the house is not more than 5 times your annual salary.

8) Create a corpus of not less than 30 times your annual expenses before considering retirement.

9) Spend less than you earn.

10) Try to save at least 30% of your salary.

11) Invest regularly.

12) Invest for long term; not less than 10 years, preferably 20 years or more.

13) Never stop your SIPs, especially in bear markets.

14) Never forget that all asset classes would always be cyclical.

15) Equity would provide the best return over long run than all other asset classes.

16) Follow portfolio diversification.

17) Follow asset allocation.

18) Have an advisor. The reward is worth the cost.

19) Check and review your portfolio only once a year.

20) More than your knowledge, it’s your behaviour which matters most for success in markets.

21) Come what may; always stay the course.

8 Responses to “Some basics”

  1. Very nicely summed up.

  2. Ayyappan J said

    Thanks – Simple & Crisp – On Serial No 1 Emergency Fund – Do I need to keep it in SB or can I have in FDs as well. Please clarify.

  3. Kannan Nagarajan said

    Regarding where to keep your emergency corpus, my humble suggestion would be to keep it in a liquid fund, which I am personally doing. It gives a better return than keeping the money in SB account. It is much flexible than a FD, meaning you can withdraw your money anytime on t+1 basis. And most of these Liquid funds can be accessed electronically saving you energy and time.

  4. How did you arrive at 30 times annual expenses for retirement? At Rs. 10 lakhs annual expenses, Rs. 3 crore fund value, 6% average long term inflation and 8% post tax returns, this should last for around 45 years. 30 times is very much on the upper side, IMO.

  5. Not only that, even the principal repayment has not been considered.

  6. Hi Muthu ,

    Few clarifications.

    1. 2 bank accounts.
    A. Is it 1 PSU + 1 private or 2 PSU or 2 Private
    B. What is guaranteed amount we get in case of bank failure

    2. Credit Card .
    Do we need to one .any advantage of owning it -apart from credit
    Pls advise on this .


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