By Tensing Rodrigues
Experts say that investments in equity funds should be done for long term (say more than 5 years). One should not be concerned with short-term trends.  At the same time experts also suggest to review the financial plan periodically (every two years or so) to check if the gains are in line with the expectations. If the short-term equity results are only of academic interest, then what is the point in reviewing it prior to that? Joel Martins

I can understand your dilemma. But there is no real contradiction in the two pieces of advice. Equity funds are indeed for long term; you should not plan to redeem them before less than five years; also the savings locked in such funds should be such that you will not need to access them before five years.
The need to review the investment portfolio regularly, say every two years arises because your investment decisions and the choice of stocks or MF schemes is based on certain expectations. These are not expectations in terms of rates of returns; they are expectations in terms of economic trends. After some time, you may observe that the trends have not taken a direction that you expected them to take. So it is necessary to review the investments which were based on those expectations.
For instance, a couple of years back I invested significantly in foreign equity as a measure of diversification. But now I find it was counterproductive; the foreign equity has consistently performed worse than Indian equity, and I do not expect it perform any better in near future. So I have exited almost all the foreign equity containing funds. The same has been more or less true of “gold funds” that invested in shares of gold mining companies. I had invested in these as I expected gold to perform well in an uncertain global scenario. My expectations with respect to gold price have been justified; but the prices of gold mining company shares have not kept pace with gold price. So I have moved from the “gold funds” to gold ETFs.
The review therefore, is not so much based on meeting return targets as it is based on confirmation of expected economic trends.
What are the benefits of a Collective Investment Scheme invested in equity? Thula Maphutha.
I have not really followed your question. Could you please elaborate?
With reference to your article ‘Reverse Mortgage Loan: A Boon to Senior Citizens’ on May 6, 2010 : Since this type of loan will run into lakhs of rupees, would you please clarify how the cost of insurance of the mortgaged house is arranged, as the amount of insurance will also be very much higher? Sripad M Velingkar
The insurance cover for the house has to be equal to the value of the house. The premium for the cover has to be paid, obviously, by the house-owner/borrower.
There is a big tree in front of my house and there is every possibility of the tree coming crushing down on the house in these rains.
Can I take insurance to cover me for the possible loss? Kamlesh Salkar
You can take a house insurance policy to cover the risk; the policy will cover the structure as well as the contents of the house. But you need to inform the insurance company that the danger from the tree falling exists. However, if you feel that the possibility of the tree falling is really strong, better than the insurance policy, is doing something about the tree.
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