It’s better to invest more when your responsibilities are fewer
PremiumAmong asset classes, equity comes at the higher end of the spectrum of investments and gets classified as high risk
I am 20 and have just begun my first job. My monthly take home is ₹25,000. So far, I have invested 50% of the salary in equities. Health and life insurance are taken care of by my parents and company. I have zero expenses and would like to invest much more aggressively. Could you recommend a plan to allocate this money?
—Name withheld on request
It is good that you are looking at investments at the start of your career. Also, you are on the right path in investing a large percentage of your income, when you have few responsibilities. Going forward, your investments will come down in percentage terms but will increase in absolute terms. The key is to maintain financial discipline.
Among asset classes, equity comes at the higher end of the spectrum of investments and gets classified as high risk. That is where you are currently investing. But if you are investing in stocks, make sure you do it after understanding the stock markets and the stocks you are investing, and not merely on hearsay. Alternatively, equity mutual funds are a good option, where you can start monthly investment via a systematic investment plan (SIP). You can keep equity as an asset class for investments, provided you have risk tolerance and a long-term investment objective.
I have a taxi driver friend who earns ₹15,000 per month. I would like to suggest some retirement benefit plans to him with average investment of ₹500 to ₹1,000. Please advise.
—Aniket Bagve
It is indeed a noble thought. You need to ensure that the funds he plans to save are meant for the long term. Also, instead of saving in a lock-in instrument with an annuity plan, a debt hybrid mutual fund or hybrid-balanced advantage fund can be a suitable investment option.
A monthly SIP can be planned to save for his retirement corpus. And an income stream can be started by using a systematic withdrawal plan at the time of retirement. All these strategies are easy to implement.
Surya Bhatia is managing partner of Asset Managers.
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