Ask us | On investments

Published - January 16, 2022 10:47 pm IST

Q. I am 22 and have managed to save some funds from pocket money during my time at college and converted it into a fixed deposit. Yet, with the very low interest rates being offered by banks during recent times, my money is just not growing. How do I move into the financial market and importantly, where do I find specific knowledge regarding investing as a beginner?

Stuti Swagat

A. It is good to diversify your investments across asset classes. And if you do not need money in the short term, then you should definitely invest in market-linked instruments like mutual funds. Stocks could be the next step and that too, only if you are willing to track the markets closely. With mutual funds, start with simple equity index funds that track the market passively. This way you don’t need to do much research on which fund or fund manager is doing well or worry about being sold the wrong product with high commission. If you can commit to not touching your savings for at least seven years, consider 60-70% in equity index funds (like the Nifty 50, Nifty 500, Next 50 and so on) and the rest either in traditional options such as PPF or in debt mutual funds, specifically short duration and corporate bond funds.

Ensure you do a regular monthly SIP on these funds to navigate market ups and down. You can read this article to get more clarity on how to invest in the market. Go to or scan the QR code that appears along with this article.

On building knowledge – both reading and investing will help. You can consider reading books such as Let’s talk money by Monika Halan, Money wise by Deepak Shenoy and You can be rich too: with goal-based investing by P.V. Subramanyam and M. Pattabiraman, to know the basics of money and financial planning. You may refer to mutual fund (MF) websites to know the basics of MFs.

Q. I am 28 and self-employed. I have started developing an interest in the stock markets and have been learning since the pandemic began. I couldn't help noticing the sudden growth in people’s interest in initial public offerings (IPOs). However, research efforts made via the Internet tell me that some experts view it as unsafe, without proper knowledge, to go for these offerings.

So, what should we know about, before applying for an initial public offering?

Kavin S

A. IPOs are seen as a source of quick wealth in a bull market. But popular to such bull market belief by new investors, past data of IPOs suggest that the wealth effect fizzles out with time. If you are really interested in investing in an IPO, you need to get the following three combinations right: one, you need to find a business that is scalable and that can compound earnings and generate steady cash flows. Two, you need to identify such a business at the right time — when its growth is taking off. Three and most importantly – you need to buy it at a reasonable price/valuation that provides sufficient upside for you.

In stocks that are already trading in the secondary market, getting all of these three right may be difficult but very much possible. With IPOs, it is not easy. For one, your understanding of the company making the public offer is limited to what is said in the offer document or prospectus.

Here, the performance record stated is limited. Two, in terms of timing, IPOs are more timed to offload the stakes of promoters or private equity investors when a sector is fancied the most (such as chemicals or e-commerce IPOs in 2021) than allowing you to enter a business at the right, opportune moment.

Three, since those exiting the company during the IPO would want the maximum value, it is not easy for an IPO to be priced realistically — leaving real long-term upside. You will see that the IPOs of brands such as Policy Bazaar, despite listing gains, have slipped below the offer price, unable to sustain the gains! So, if you are lucky to get all these three right, IPOs make sense. Else, they are more a lottery!

Q. I am a 32-year-old Air Force employee with nine years of service left. I want to invest about ₹5,000 monthly for my one-year-old daughter in the stock market. Please advise.

Vivek K

A. First, thank you for your services. We’re glad that you are starting investments early for your daughter’s future. Since you have a girl child, consider a product like Sukanya Samriddhi Yojana by the government. This can be about ₹2,000. For the rest, start investing in equity mutual funds — index funds like the Nifty 50, Nifty 500, international index like Nasdaq 100. Use systematic investment plans (SIPs) and ensure you do not disturb the corpus for at least 7 years. As your income grows, raise your SIP value. Set aside any lump sums you get to save, separately, in FDs for any school expenses beginning in the next couple of years.

(The adviser is Co-founder,

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