MF Query Board

Readers are requested to send only one query at a time so that more readers get a chance. Have questions relating to any aspect of personal finance. Ask DSIJ at editorial@DSIJ.in and get your queries resolved. 

How much should I save every year if I want to go on vacation after 4-5 years?
- Ramesh Shukla

We believe every individual has various life goals and in order to achieve those life goals he or she should have an adequate financial plan. If you are planning for a vacation after four to five years, you should also have a proper plan. Nowadays, vacation has become one of the essential life goals. A working person needs some kind of a break from his monotonous life in order to relax and create some memories. A vacation can cost a lot now, which might create financial stress if it has not been budgeted for earlier.

You have not disclosed your destination or the number of persons in your family and hence we can only give you a rough guidance on how to finance your vacation. Periodic investment depends on the destination you choose for your vacation which includes transportation cost, hotel stay cost, commutation cost within the city or country, food cost, etc. This cost should be taken into account and then estimate what total amount will required and then spread that cost over the year as an investment till your vacation. This will enable you to create a fund and finance your vacation without any financial stress.

For instance, if you plan to go on vacation in India itself, say in Rajasthan, with your spouse then the flight may approximately cost around Rs 10,000-15,000, hotel stay may cost around Rs 20,000 if you plan a trip for 5-6 days and all the other items may cost you another Rs 30,000. The total trip amount would work out to around Rs 65,000. You should therefore invest at least Rs 10,000 every year for five years in conservative funds that gives a return of 8 per cent per annum. The above example is just for illustration purpose. The costing isn’t absolute and it may vary.

Which parameters should I consider while investing in any mutual fund?

- Madhuri Patel

Presently, many individuals are getting aware about investing. Many of them are curious to invest in the equity market but due to lack of knowledge they choose to invest in mutual funds which have lower risk as compared to direct equity and also offer diversification. But before investing in any mutual fund you should first assess your risk profile, investment horizon and expected returns. After assessing the same you should look for a mutual fund apt for your profile. There are various schemes offered by mutual funds and so you should select an appropriate scheme which will help you achieve your financial goals.

Before investing in a mutual fund, you need to know and assess:

1. Does the fund fit into your investment objective?
2. Has the fund performed well in the past years?
3. Does the fund outperform the underlying index?
4. How much does the fund charge you for managing your funds?
5. Assess whether fund is of higher risk or lower risk?
6. What are the tax implications of investing in these funds?