New Delhi :
I’m 28, and my take home monthly salary is approx ₹80,000. i have deposited ₹5 lakh so far in fixed deposits. i contribute ₹1.2 lakh every year to Public Provident Fund (PPF) for my retirement security and to save tax under Section 80C of the Income Tax Act. i can save ₹30,000 per month, and I want to invest in mutual funds. How should I proceed?
—Name withheld on request
Considering your young age, I would recommend you to invest in equities to achieve long-term financial goals, i.e. those maturing after five years. Begin by identifying your financial goals maturing within five years and those maturing after five years. Since equities can be very volatile in the short term, invest through SIP in the direct schemes of these Short Term Debt Funds-ICICI Prudential Short Term Fund and HDFC Short Term Debt Fund to achieve your short term financial goals. You can use an online SIP calculator to find out the monthly contribution required to achieve those short-term financial goals, assuming an annualized return of 5% per annum.
Your existing investments in fixed deposits can be used as an emergency fund to meet financial needs arising out of job loss, illness, disability etc. Aim to have an emergency fund to meet unavoidable expenses and monthly contributions to the least important financial goals. six months.
Your remaining monthly surplus should be invested in equity funds to achieve long-term financial goals. You can distribute the surplus in the direct schemes of these large-cap index funds and flexi-cap / “large- and mid-cap” funds- Tata Index Sensex Fund or HDFC Index Sensex Fund; and Parag Parikh Flexi Cap Fund or Mirae Asset Emerging Bluechip Fund- through SIP.
If your risk appetite allows, you can invest in Equity Linked Savings Scheme (ELSS) funds instead of Public Provident Fund (PPF) to fulfill the twin objective of saving tax under section 80C and securing your retirement security. can do. ELSS funds offer high liquidity as they have a lock-in period of three years, which is the shortest of all investment instruments that qualify for the Section 80C deduction. Since ELSS funds invest in equities, and equities as an asset class outperform fixed income instruments by a wide margin over the long term, investing in ELSS can help generate a larger retirement corpus than PPF. can.
Naveen Kukreja is the Chief Executive Officer and Co-Founder of Paisabazaar.com. Please mail your questions and thoughts to mintmoney@livemint.com.
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