Readers can send in queries on personal ﬁnance and investing to [email protected]
Q. I am 27. I recently took up a State government job. My salary is ₹28,000, after PF and NPS deduction. I have also opened a PPF account. I want a personal financial plan. I have no insurance and my parents are aged. I am planning to buy a home. Also, how can I manage my funds after retirement?A. Start with saving regularly. In another 8-10 years, you can seek the help of a financial planner to draw a plan for key goals and retirement. You have all the right traditional investment options. Continue them. Go for a good medical insurance policy and see if you can afford to add your parents, too, in the same policy. Get a pure term cover and make yourself provide adequately for your goals, loans, and the income loss your family could have for the next 10-20 years at least. Do not go for money-back policies. Build an emergency fund in short-term FDs equivalent to 3-6 months of expenses and keep renewing the same to cover any emergency needs for your family, especially in these tough times.For retirement, make sure you have good allocation towards equities in your NPS. Other than this, you can start with some SIPs in equity mutual funds. Instead of searching for high quality advice, simply choose equity index funds based on the Nifty index and the Nifty 500 index and invest in them regularly. You can use any online platform that offers direct plans of mutual funds. Keep this investment as part of your retirement kitty and do not be troubled by falls in the market. There is time for you to think about managing post-retirement money.As for buying a home, please don’t rush into it until you are settled in your job and raise a family. Let your income grow to a level where you don’t have to pay more than 30-40% of your income as EMI and you can still save and invest at least 10-20% of your income. You can start saving to cover the margin needed to buy a house with a mix of FDs and equity index funds.Q. I am a 24-year-old government employee. Given where the markets are, what are the options to achieve my financial requirements of buying a house at 32?A. You have eight years for your goal. That is a decent time to have a mix of various instruments. In other words, you should take an asset-allocated approach. Unless you are familiar with stock-market investing, don’t venture into it for this goal. And, do not try to time your entry. It is hard even for seasoned investors. Simply go with SIPs in quality multi-cap equity and corporate bond funds and add some money to FDs when the interest rate turns better in future. Bond markets, too, need timing and identifying low-risk and liquid options. Avoid it in case of insufficient knowledge. Debt funds will provide you with exposure to quality bonds. If you believe in gold, then consider 10-15% in it but only through gold mutual funds and not physical or digital gold. Consider it as a hedge to protect your portfolio when equity markets are down.Q. I am a commerce graduate, looking to gain knowledge about stock market Can you recommend some online courses?A. You could start with reading good books on finance by great investors/authors such as Benjamin Graham, Peter Lynch and John Bogle. You could also use all the free sources (including classes) from Professor Aswath Damodaran to learn about valuations. There are courses you can do on technical analysis but please know that technical analysis is not a hobby. It is serious business and needs full- time effort and dedication.(The author is co-founder, Primeinvestor.in)
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