Reader's corner: Financial planning

What is the best way to take exposure to sector funds? Is it okay to keep more than one sector fund in my portfolio? I was checking sectoral fund returns and saw that information technology (IT) has given the best return in the past 10 years beating all other categories of equity mutual funds.

Sector funds are a good idea as they enable us to take aggressive exposure to a sector or industry.  Some sectors have business cycles, like technology, logistics, infrastructure, etc, while others don't - like pharma, fast-moving consumer goods, and so on. Often sector funds throw out surprises. Technology may gain due to a depreciation in rupee while pharma, although a sector that sees perpetual demand, may be grappling with political and quality control issues, as seen in the past few years. Sector funds are a good idea, but a better approach is to ensure that your exposure to all sectors does not exceed 20 per cent of the equity portfolio.

Does it make sense to opt for mutual funds that offer life insurance with them?

Add-ons and toppings that come free are always welcome. But when they come with a cost, as in such combinations, one must study these proposals under a microscope. Even if the cost is negligible, from a hygiene and flexibility point of view, one should keep the requirements of personal finance services independent.

I am about to retire in eight months. I am expecting close to Rs 1 crore from my employer with a monthly pension of Rs 28,000. How can I invest this money to ensure a regular income? I also want a portion of it to keep growing so that the funds keep pace with inflation.

It is always a challenge to have a regular income as well as growth of funds. Think about it, it is like trying to grow a tree, and every time there is a little branch that grows we chop it off.

Now, the first question is how much additional income do you require. In today’s time, you can earn between 6 per cent and 9 per cent by making investments in bonds and deposits. Based on this, you decide how much you will need to invest for regular income. The remaining capital can be deployed for growth by investing in equity mutual funds or buying shares.

I am 28 and getting married this year. Mine is an arranged marriage. I want to know about the money habits of my partner (the groom). How do I speak about it with him? It looks very odd. But I want to know before I tie the knot.

Ask him directly. What he earns, how much percentage he saves, and where? I know this will be difficult considering the social fabric around arranged marriage. However, it could turn out to be the best question you have ever asked. It will tell you about the person's character, sense of responsibility, maturity and open-mindedness, commitment and outlook towards life. Asking this delicately and in person might be a better idea. Best wishes to you.

I have an eight-year-old daughter. I want to start teaching her good money-related habits. Is this the right age? What can I teach her about money at this age?

There are many things you can do. Open a bank account and let your daughter read the bank statement. This is empowering. Ask her to help in the house, do small errands and give a small reward for doing that. Deposit money in the bank account and see the bank account grow. Let her understand that money is earned in exchange for work. Take her out for shopping and make her handle the transaction. Send her under supervision to buy something on her own. Involve the child everywhere possible.