YOUNG PERSON ALLOCATION OF FUNDS

Investment Advice: What are good strategies to invest my savings in India?

Aniruddha Sarkar, Fund Manager by the day and pursuer of bigger ideas thereafter!

Written Jul 7, 2013

Good to know that young Indians are getting interested in planning for their future investments! Now coming straight to the point of your recommended investments:

I am assuming you earn Rs 1 lakh a month and are left with Rs 50k as savings every month. Below is the recommended investments:

1. Keep Rs 3 lakhs in Fixed Deposits to make up for your emergency fund. This would cover your regular expenses and lifestyle for 6 months even if for some unforseen event you lose your current Job and are looking for a new job.
2. Buy one Term plan for Rs 1 crore. Considering your young age, you would have to shell out not more than Rs 7k annually as the premium for this. If you are not married then make your parents the beneficiaries of the same. Post your marriage, you can add your wife as the beneficiary. The earlier you take the Term Insurance the cheaper it would be in your life.
3. Avoid buying insurance policies for Investments. ITS A STRICT NO BY ANY FINANCIAL PRUDENCE. Investments should not be mixed with insurance. The term plan would be sufficient for now. Also take a health plan (even if your company provides for the same) as you should always be covered for unforseen health issues.
4. Considering your young age, would recommend a higher allocation to equities and lower to fixed income. For equities would recommend you to start SIP in some largecap and multicap equity funds. You can allocated Rs 30k every month towards these SIPs. Allocate around Rs 15k each month to Debt Mutual funds. Another alternative to Debt MF is NHAI Tax Free Bond which gives a coupon of 8.2% (tax Free). In a declining interest rate cycle, you would also make gains on the capital of the bond.
5. Real Estate is something everyone in India loves to advice to invest. The problem is I am not clear you stay and work in which city. Depending on your location I would be able to give you more specific and personalized recommendation on the same.