Sir, I am a 43-year-old government employee. Recently, the government…

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Veer Sardesai: , Nov 17 2008, 12:24 IST

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…had given arrears of the Sixth Pay Commission. I got approximately Rs 60,000 as 40 per cent of my arrears. In the next eight to 10 years my daughter will be of marriageble age and my son will have completed his XII. Should I invest this money in a Ulip or in a mutual fund for a 10-year horizon? Please suggest the name of the company and the name of the plan for either the Ulip or the mutual fund, and for how long I should invest in each of these instruments. I will be able to invest Rs 5,000-6,000 per month.
Sushil Kr Sachdeva, e-mail
Equity investments should be done with a long-term horizon. Since you have about 10 years before you need the capital, you should certainly look at investing in equities. Also, it is usually better to separate your insurance and investment needs. Your insurance needs can be met by using a term plan from an insurance company. Term Plans have the advantage of providing you with a large sum assured for a small premium.

For your equity investments you could consider investing in an index mutual fund or an exchange traded fund (ETF). An index fund is one that invests in stocks of an underlying index in the same proportion as stipulated by the index. It is, therefore, expected to provide returns very similar to that of the underlying index. For example, if you invest in a Sensex index fund and the Sensex moves from 10,000 to 12000,

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