Ask Us: On investments

May 29, 2022 11:27 pm | Updated 11:27 pm IST

Q. I am a 75-year-old retired bank officer. Please advise whether I should continue with investments in mutual funds or to redirect the same to other avenues?

Sreenivasan Viswanathan

A. Mutual funds are of different types. Without knowing your funds, we cannot give an opinion on its performance. Additionally, factors such as what your need is, how much risk you can take, how much these fund investments account for in your overall investments also matter.

Generally speaking, if the funds you have are equity-based (especially high-risk ones such as mid-caps or small-caps) and this allocation is high in your overall investments, it’s better to review them and see if they suit your purpose. This is especially true if you need to set up an income stream from these funds. If you hold debt-based funds, check if returns are above-average, that there are no hidden risks in terms of the credit quality of the portfolio and your time frame is adequate to match those funds. If so, you can continue to hold them and set up systematic withdrawal from these when you need income.

Q. I am 30. My monthly income is ₹80,000. What are my investment options if I have ₹30,000 left in savings?

Vinodini Sivasamy

A. First, you need to set up an emergency portfolio equal to about 6-8 months of monthly expenses. Hold this in your savings account and FDs that can be easily liquidated. You may already be investing in EPF – this will go towards retirement savings. You can also mull some investments in NPS for your retirement corpus – allocate more to the Corporate Debt and Government Debt options, here. It will also offer tax breaks. However, note that NPS is a very long-term investment and locks you in until age 60.

Otherwise, mutual funds and ETFs are the most suitable products to build wealth as they are versatile, well regulated, transparent and liquid. Use a mix of equity funds and debt funds, which will help diversify your portfolio and balance the risk.

Decide the allocation between equity and debt based on your risk and the time frame – higher the risk appetite or longer the time frame, the more the equity allocation. Make sure to have large-cap index funds and other large-cap based funds for the core of your portfolio. Add other aggressive funds such as multi-caps, mid-caps and small-cap funds on this. For debt funds, go by your time frame and pick funds whose average maturity is at least equal to yours. For the amount you plan to invest, 4-5 funds should do. If you do not have the time or understanding to identify quality funds, simply use index funds.

Q. I am 72, single and retired. In 2016, my father had invested ₹13 lakh in Sovereign Gold Bonds (SGBs). He passed away in 2018, and the bonds have since been transferred in my name. The lock-in period has ended and I can redeem the bonds. As the interest offered is very low, I’ve decided to sell the bonds. Where should I invest the proceeds?

S. Srinath Rajan Srinath

A. A bit of explanation on Sovereign Gold Bonds, first. SGBs are linked to gold prices – the issue price is calculated using the average gold prices of the last 3 business days of the week before the issue opens. The price at which the bonds are redeemed is based on the average closing prices of the 3 days prior to redemption. If gold prices are up at the time of redemption compared with the prices at issue, you make capital gains. Therefore, SGBs are meant to be a way to invest in gold and not to earn interest income. The interest is, in fact, an additional return as other gold products such as gold mutual funds and ETFs do not have an interest component.

If you redeem the bonds, you can consider the RBI Floating Rate Taxable Bonds. Since government bond yields are attractive at this time, you can also invest in G-secs and lock into good long-term yields (use the RBI Retail Direct platform to invest in them).

Fixed deposits of small finance banks, which offer attractive rates, are another option. But given that interest rates are beginning to move up, wait for banks to revise rates or invest in very short-maturity FDs and renew later at higher rates. If you’re investing in such FDs, spread them across 2-3 banks to maximise the deposit insurance guarantee. However, if you do not require interest income and can take some risk, there are other options. If you understand mutual funds, then you can invest in low-risk, short-maturity debt mutual funds as well. Be careful when choosing these funds – if you’re in doubt, it’s best to avoid them.

Q. I am a final year college student and have been placed at an MNC. Before starting my job, I want to gain knowledge on investing and personal finance. What courses and books would you advise me to go through?

Yash Khandelwal

A. You can check The Psychology of Money by Morgan Housel for a general understanding on financial decision-making, thinking about money, savings and spending. For a focus on the Indian investment world, Monika Halan’s Let’s Talk Money is a good option. This apart, you can look up various online platforms that explain basic investment concepts. Invest only in products that you understand and where you know the nature of risk you will be taking. Do not get influenced by returns alone or taxation alone. Diversify into different products to tap the widest range of opportunities.

(The financial adviser is Co-founder,

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