POSTED BY July 22, 2012 1:20 pm COMMENTS (3)ON
I am 24, single and currently working in a MNC for the past one year. My income details are:
Net Salary : 82,000 per month
Restricted stock units: 5,00,000 (to be vested gradually in 4 years of which 1 year has passed)
PF is around 1,50,000 p.a. (including employer’s contribution)
Company takes care of my life insurance and health insurance of myself and my parents. My parents are in a job and are not dependent on me.
I currently have around 2,50,000 in FDs, 70,000 in NSCs and around 50,000 in my savings bank account.
My monthly expenses are around 20,000 to 25,000.
Here is what I am planning to do:
1. Invest 20,000 in FDs every month (What should be there tenure?).
2. Invest 20,000 in NSC/PPF (No idea how much to contribute in each of them individually)
3. Invest 20,000 in Equity. I have tentatively decided on HDFC Balanced Fund (G), ICICI Pru Focused Bluechip Eqty (G) and Birla Sun Life MNC Fund (G). (I need advice on whether my choice is correct and are there any other good MFs that I should invest in. Also what should be the ratio of the investment in these).
Who do you think about my plans. Please advice.
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3 replies on this article “Need investment tips”
Let me congratulate you for thinking about investing so early at 24. You would be able to harness the power of 8th wonder of world called as compound interest. But while we are educated we are financially illiterate.
We don’t allow people to drive without taking a driving test yet we allow them to enter complex financial world without financial education.
Some questions: Why do you want to invest in FD or NSC or PPF? Do you know that interest on FD is taxable but interest on PPF is not? What are your expectations from the investment in equity – expecting higher return? How long are you planning to be in equities – 2 years, 5 years , 10 years, 25 years?
Do you know that In the 17 year period that the Nifty has existed, the return, net of inflation, is 55%. The long term return of the Nifty, net of inflation, is 2.6%.
Investing is confusing because it is a very large subject With many different people having as many different opinions. Investing is a plan not a product or a procedure.
Their are plethora of investment options and the marketeers blandishments may confuse you, the best way is to sit and work out a plan (with or without help of financial adviser.). You should be financially prepared not only for life’s predictable big events like your wedding, buying a house, educating your children, but also for your retirement years and sudden and unexpected bad news such as losing job or cost cutting etc.
What are you investing for? What kind of investor are you? try to answer these questions before investing.
Before investing in any product think of Think about Liquidity,Safety,Returns,Risk,Tax
We have tried to answer these questions in Beginner to Investing and Beginner to Investing – Approaches, Plan, Psychology
I would suggest dont invest too much into PPF , Keep it low (assuming you will be able to claim 80C benefit with other things)
1. Invest in FD for 2 yrs , I assume you will have few short term goals coming soon , which is somewhere in your mind , but you didnt write about it .
2. Put more money in ELSS funds (tax saving) , choose HDFC Tax saver , canara robeco kind of funds – you can do tax saving part with it .
3. As your Cash flow has a good surplus , you might want to plan out to buy a real estate sometime soon in next 1 yr and by taking a internal loan from your father . This will make sure you get into the real estate part pretty early in life rather than wait for it later .
Also dont take the cash value of your RSU this way as its dependent on market . I was into Yahoo once and when I got the RSU it was worth Rs 24 per share and then I saw it touched Rs 6-7 . I hope you understand what i am saying ! 🙂
Grab my book and read it, will give you a good background – http://www.flipkart.com/jago-investor-9380200415/p/itmd68wtdnghgyqz?pid=9789380200415&affid=INManish2
there are veteran members of the forum who would like to answer your query in details. i like to hint some outline:
1. as you are young, you try to allot more in equity/equity oriented diversified mutual funds for 10-15 yrs horizon saving investment, rather than nsc/ppf type debt instrument.
2. for nsc/ppf , better you invest only for fulfilling the gap of investments for under section 80c (presently rs.100000/- per year)., but most part you already commit through epf(your contribution only)
3. you should build up some emergency fund in linked bank f.d., liquid mf @3-6 months’ salary.
4. if you have dependents ,or otherwise you like to insure your life, think only of pure term insurance covering your working life from any insurer, online or offline.
5.if you decide to buy diversified equity mfs for long term , you should also consider the amc behind that mf: better they should be process oriented, comparatively clean, having low turnover of fund managers/ analysts (rather than only current performance of the mf concerned.). also keep no. of mf limited. better you think mfs from following amc(my choice!)
quantum , franklin( templeton) india , hdfc, dspbr ,
6.for less 5 yrs goal better not to prefer equity/equity oriented mf. go for debt instrument.
7. know the basics of asset allocation even for long term investment, and put it in practice.