Ahead of the Curve provides you with analysis and insight into today's global financial markets. The latest news and views from global stock, bond, commodity and FOREX markets are discussed. Rajveer Rawlin received his MBA in finance from the Cardiff Metropolitan University, Wales, UK. He is an avid market watcher having followed capital markets in the US and India since 1993. His research interests includes areas of Capital Markets, Banking, Investment Analysis and Portfolio Management and has over 20 years of experience in the above areas covering the US and Indian Markets. He has several publications in the above areas. The views expressed here are his own and should not be construed as advice to buy or sell securities.

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Wednesday, 26 July 2017

Plan to buy your dream car / Increasing consumerism

You have landed that dream job.  Finally you have some significant savings and you are in the market for a brand new car. You think your budget would be in the range of five to six lakhs. You are now contemplating taking a loan. You survey the landscape and find auto loan rates ranging anywhere from twelve to fifteen percent. You are disheartened a bit as the loan rates appear a bit expensive. You would have to shell out quite a bit in interest expense over the life time of the loan. 

This however should come as no surprise to you as auto loan rates have been exhibiting a rising trend over the last five to ten years. All is not lost though; If you can postpone your purchase for a little while and develop a systematic investment strategy in top rated mutual funds you may be able to save enough for your car and also save significant interest expense that a car loan would entail.

For example if you are about thirty years old and you have a medium risk appetite implying you invest about 60% in equity and 40% in debt mutual funds you could achieve your targeted goal of Rs five lakhs in about 5 years if you invest as little as Rs 5,000 a month. Your monthly investment would be diversified into top rated mutual funds from highly rated fund houses like Birla Sun Life, SBI, ICICI Prudential and Franklin Templeton. If you double your investment amount to Rs 10,000 a month then you accomplish your investment goal a lot faster.

If you have a slightly higher risk appetite and are willing to invest about 80% in equity and 20% in debt you can potentially accomplish your investment target a lot faster than the earlier approach with proven investments in top rated mutual funds investing as little as Rs 5,000 a month. Double that investment and your dream car is just a few years away. So why wait? Custom make your own unique investment strategy to make that dream car a reality.


  1. Interesting observation Mr Rajveer. Do you think the rated fund houses can falter and disrupt the car purchase plans? How does one ensure investment in a good SIP given that the fund manager chooses the portfolio of the fund? How does one determine the parity of interest rate (car loan) and returns of SIP? How about factoring inflation.

    1. Yes sir in the short run the market is a bit ahead of itself but SIP's are the way to go long term. I think loan rates are a bit too high and hence the attractiveness of the investment option and SIP's are the only way to beat inflation.

  2. What would be the good option for a beginner in investments? Equity or mutual funds Why? And suggestions please.

    1. SIPs on good mutual funds are the best bet long term and i mean at least 5 years as the risk-reward is considerably better. I would stick with dividend and income funds in the short run from reputed fund families like HDFC, SBI, Templeton etc. No lump sum investments only SIP's

  3. Each fund has its own Investment policy, based on asset allocation between equity, debt and money market instruments.
    You can invest in a combination of funds by allocating your fund between different fund options. Also you can switch between funds using fund switch option, now a days there are so many options available where you can switch from one fund to another.lets take an example of if u invest in govt securities, it will give you stable return. But if you invest in blue chip fund or equity fund it will be very risky.in my point of view if you are investing money allocate your fund 10% value to equity fund, 40 % with opportunity fund , rest 50% you can divide others fund like income fund/bond fund /conservative fund.

    Coming to buying car concept, I think buying car is not an investment, as it has depreciation value as it ages. But in any situation you can sell your car , if you need some money. So in that scenario we can say it's an investment.
    As sir have already mentioned that buy car after 5 years. I'll say don't buy better increase your Investment period to 10 years till that time use ola/ uber with share pass..😀😀
    I just shared my opinion, not arguing with anyone.


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My Asset Allocation Strategy (Indian Market)

Cash - 40%
Bonds - 20%
Fixed deposit - 20%
Gold - 5%
Stocks - 10% ( Majority of this in dividend funds)
Other Asset Classes - 5%

My belief is that stocks are relatively overvalued compared to bonds and attractive buying opportunities can come along after 1-2 years. In a deflationary scenario no asset class does well other than U.S bonds, the U.S dollar and the Japanese yen, so better to be safe than sorry with high quality government bonds and fixed deposits. Cash is the king always. Of course this varies with the person's age.