Q. Are there any good options available for investing at least ₹2 lakh annually for the next few years to maximise my wealth?
Nikhil
A. If you are risk averse and are looking at an investment horizon of less than 5 years, then you can consider bank deposits and post office deposits. If you have a longer time frame for building wealth, then you can complement this with some exposure to equity index funds such as the Nifty or Nifty Next 50 through SIPs. You can also invest in an international fund (available domestically) that invests in U.S. indices such as the Nasdaq 100 or the S&P 500.
This way, you will get some global exposure with Indian rupees. Depending on your risk, these equity funds can be 30%-60% of your total portfolio. Lower the equity exposure if you cannot handle market ups and downs.
Q. I am 58 years old. I retired on May 31. I will be getting GPF, DCRG and other benefits as a lump sum besides monthly pension. I haven’t done any investment as of now. Where and how do I invest the money? Are lump sum amounts taxable?
Radhika H
A. Your GPF will be tax exempt if received on retirement. Similarly, gratuity is exempt, and the amount will be a maximum of ₹20 lakh for government employees. If you are going to receive pension and it is adequate, then you need not look for options with high returns and risk your capital.
Consider investing the proceeds in Post Office Senior Citizens’ Scheme. For those above 55 but less than 60, if the account is opened within a month of receipt of the retirement proceeds, you will be able to invest up to the amount of retirement proceeds (subject to a maximum of ₹15 lakh).
The remaining sums can be parked in Post Office fixed deposit and FDs of at least 2-3 banks for just one year. As interest rates are low, do not lock into higher rates. Rather, wait for rates to improve and then lock in.
As a diversification option, you can consider corporate deposits of reputed NBFCs such as HDFC or Sundaram Finance. But, here again, make sure you do not expose over 5-10% of your corpus in each. Please note that the interest income from all these sources will be taxable.
Q. I'm 31. I got married a year ago. I'm planning to make some investments. My wife and I have a health insurance plan but no investments. We stay in a rented house. I want to create wealth and enjoy financial freedom in the next 10 years. Please advise.
Skanda Kumar G. K.
A. Make sure you have a pure term cover to protect your family from any unforeseen risk to your life. You don’t really need other insurance-cum-investment products unless you understand what they really return.
If you are just making a beginning, please start with RDs or FDs. For tax purpose, EPF and PPF should be adequate. Once you get disciplined with savings, you can gradually consider one or two tax-saving funds (ELSS) for tax purposes.
For general investments, start monthly SIPs in equity mutual funds. Instead of going with the multiple choices out there, stick to equity index funds on the Nifty or Nifty 100 index if you cannot track fund performance and review. You can start with 15-20% exposure of your total savings to equity funds and gradually increase it to 50-60% once you get comfortable. Remember, equities are not meant for investment time frames of less than 5 years and you should get comfortable with frequent falls in your investments in equities.
(The author is co-founder, Primeinvestor.in)
