I’m an avid reader of the Moneywise section. I’m 23 years old and can save up to ₹30,000 a month from my salary. What are my investment options in order to maximise wealth within the next 10 years?
Adithya Ravi
First, if you do not have it already, build an emergency corpus of at least six months’ worth of expenses. Top this up from time to time based on the change in your expenses. Starting this early will hold you in good stead in later years when your financial-goal requirements increase. If you do not foresee requiring any part of your planned investment in the next 5-7 years for any purpose such as higher education, you can invest in mutual funds.
Make sure to allocate to both equity and debt funds based on the risk you wish to take. However, keep at least 20% in debt funds. In the equity funds, large-cap index funds are a must-have. Then, add aggressive funds from categories such as flexi-cap, focused, mid-cap, and small-cap. The lower your risk appetite, the lower your allocation should be to highly aggressive and risky funds. Avoid going more than 30-35% allocation to pure mid-cap and small-cap funds. On the debt front, use a mix of short duration, floating rate, and corporate bond funds. Ensure that these funds invest only in top-rated debt instruments.
I am looking to invest in property in 2023/24. I have investments in equity and debt instruments such as bank and corporate FDs, NCDs and tax-free bonds. I wish to use the debt investment for buying. I will be receiving ₹1.3 crore in 2022 and ₹1 crore in 2023 from maturity proceeds. Where should I park my funds till the deal is done?
Nikhil Gokhale
In your case, what is most important is capital protection and not returns. You can retain a part of the amount in bank deposits – just pick the right tenure based on when you will need the amount. You can also go for government treasury bills, which are short-term instruments of 91-day, 182-day, and 364-day tenures. These auctions come up from time to time and you can invest in these through some brokerages or through the RBI Direct portal. However, you will need to hold these till maturity. Finally, you can park part in liquid funds. Use at least 2-3 funds, based on the amount invested, and pick funds that have large AUMs and low expense ratios.
I have ₹1..5 lakh which I want to invest in mutual funds. I am 30 years old. My investment horizon is 10 years and I have a high risk appetite. Please advise.
Aiswarya V Nair
Ideally, when you look at what funds to invest in, it needs to take into account where you have already invested, the quantum of investment and the proportion of this total the amount you plan to invest will be. This will determine which type of fund to go for which would complement your existing investments. In your query, it would also help to know if this amount is a one-time only or whether you plan on increasing this. Based on the limited information in your query, it is best that you invest it in an aggressive hybrid fund. If you hold some amount in FDs and are willing to take the risk of market corrections, go for large-cap index funds or flexi-cap funds/focused funds with a large-cap orientation.
I am 18 years old and have no idea regarding finance or investments. Which books and online resources would be the best for me to start with?
KAVYA ASHOKAN
It’s great that you want to get started on investing and understanding how it all works so early! For a general understanding on financial decision making, how to think about money, savings, expenditure and so on, a good book is The Psychology of Money by Morgan Housel. For a book more focused on the Indian investment world, you can check Monika Halan’s Let’s Talk Money. If you want to get more in-depth with stock investing, you can refer to Zerodha’s Varsity. This apart, there are a few online platforms that explain concepts which you can search for.
I am 22 years old and just earned my first monthly salary of ₹30,000. I am looking for investment avenues where I can put 30% of my earnings. I am ready to undertake risk for another five years or so, considering I do not yet have a family to provide for. Could you offer some advice?
Pranav Prakash
Congratulations! To begin with, start to build an emergency corpus equivalent to at least six months’ worth of expenses; use part of your planned monthly investment until you complete accumulating the necessary amount. Top this up if your expenses change.
For your investments, first list out the purposes towards which you intend to save – this will help you get the timeframe you have for investment and therefore the investment options. Always allocate between equity and debt-based investments as it helps keep return fluctuations under control which ultimately improves long-term returns. Longer the timeframe, the more you can allocate to higher-risk higher-return equity and vice versa.
In equity, your options are equity funds and direct stocks. Avoid direct stock investing until you gain some market and investing experience. In debt, options are debt funds, FDs from banks and NBFCs, corporate and government bonds, and PPF (you are likely to also have EPF). Bank FDs are useful for your emergency corpus explained above. Else, if you’re a tax-payer, debt funds are the most tax-efficient option.
For a timeframe of about five years, you cannot go too much in equity (needs at least 5-7 years minimum). Allocate about 50% to equity funds and the remaining to debt. Increase equity if timeframe is longer. In equity, large-cap index funds are essential. You can also consider slightly more aggressive funds from categories such as flexi-cap or focused funds. Avoid very high risk mid-cap, small-cap or multicap categories as your timeframe does not allow it – you’re also new to markets, so understanding the way these segments behave might take some time. In debt funds, use short duration or floating rate funds. Ensure that these funds invest only in top-rated debt instruments.
I am 23 years old and have started my career in software industry. Presently I am earning ₹25,000 a month and I am thinking about investing ₹5,000-7,000 a month. What are the options I have apart from stocks and mutual funds which will ensure guaranteed returns in the long run? What are the government schemes which are good when it comes to returns?
G.S.S SHANKAR
Do note that mutual funds or stocks do not guarantee returns. In government schemes, some options are the EPF, PPF, NSC and post office deposit schemes. Then there is the RBI Taxable Floating Rate bond, which pays 35 basis points above the NSC rate and is locked in for 7 years. These are available with banks. Then you have Central and State government bonds. These come up for investing (through auction) from time to time. The yield you get on these will differ with each bond issue. Once you subscribe to a particular issue, you will lock into that yield. You can invest in these bonds through the RBI Direct platform and some brokerages. In all these instruments, apart from PPF and EPF, note that the interest is taxed at your slab rate.
I am 22 and getting ₹2,000 per month. I don’t want to risk this in stocks as it is uncertain. What are the other avenues I can use for this money?
Sivaesh Thooran
If you do not wish to take risk, the safest option are fixed deposits from banks. If you want to earn a slightly higher return, you can consider FDs from small finance banks and large, stable NBFCs but do note that there is some risk in these. You can also consider post office deposits and schemes such as the NSC.
(The adviser is Co-founder, PrimeInvestor.in)
