NEW DELHI :
I’m 28, and my take-home month-to-month wage is about ₹80,000. I’ve amassed ₹5 lakh in mounted deposits until now. I contribute ₹1.2 lakh every year to public provident fund (PPF) for my retirement safety and for saving taxes below Part 80C of the Earnings Tax Act. I can save ₹30,000 monthly, and I wish to spend money on mutual funds. How ought to I proceed?
—Identify withheld on request
Given your younger age, I might advocate you to spend money on equities for attaining long-term monetary targets, that’s, these maturing after 5 years. Begin by figuring out your monetary targets maturing inside 5 years and people maturing after 5 years. As equities may be very risky within the quick time period, spend money on the direct plans of those quick time period debt funds—ICICI Prudential Quick Time period Fund and HDFC Quick Time period Debt Fund—via SIPs to realize your short-term monetary targets. You need to use on-line SIP calculators to search out out the month-to-month contributions required to realize these short-term monetary targets, assuming an annualized return of 5% each year.
Your present investments in mounted deposits can be utilized as emergency funds for coping with monetary exigencies arising from job loss, sickness, incapacity, and so on. Intention to take care of an emergency fund large enough to fulfill unavoidable bills and month-to-month contributions for essential monetary targets for a minimum of six months.
The remainder of your month-to-month surpluses ought to be invested in fairness funds to realize long-term monetary targets. You’ll be able to distribute the surpluses in direct plans of those 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 Rising Bluechip Fund—via SIPs.
In case your danger urge for food permits, you possibly can spend money on Fairness Linked Financial savings Scheme (ELSS) funds as a substitute of Public Provident Fund (PPF) to serve the dual goal of saving tax below Part 80C and obtain your retirement safety. ELSS funds provide increased liquidity as they’ve a lock-in interval of three years, the shortest amongst all funding devices qualifying for Part 80C deduction. As ELSS funds spend money on equities, and equities as an asset class beats mounted revenue devices by a large margin over the long run, investing in ELSS might help generate a much bigger retirement corpus than PPF.
Naveen Kukreja is the chief government officer and co-founder of Paisabazaar.com. Please mail your queries and views to mintmoney@livemint.com.
Supply: Live Mint