Ask Us: About Investing – The Hindu

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Q. I am a 75 year old retired bank clerk. Please advise should I continue to invest in mutual funds or redirect the same to other avenues?

Sreenivasan Viswanathan

A. Mutual funds are of different types. Without knowing your fund, we cannot comment on its performance. In addition, factors such as your needs, the level of risk you can take, the share of these fund investments in your overall investments are also important.

Generally speaking, if the funds you have are equity-based (especially high-risk ones such as mid or small caps) and this allocation is high in your overall investments, it’s best to look into them. and see if they suit your purpose. . This is especially true if you need to create an income stream from these funds. If you hold debt-based funds, check if the returns are above average, that there are no hidden risks in terms of the credit quality of the portfolio and that you have sufficient time frame to match these funds . If so, you can continue to hold them and set up a systematic drawdown on them when you need income.

Q. I am 30 years old. My monthly income is ₹80,000. What are my investment options if I have ₹30,000 left in savings?

Vinodini Sivasami

A. First, you need to set up an emergency wallet equal to about 6-8 months of monthly expenses. Keep it in your savings account and FDs which can be easily liquidated. You may already be investing in EPF – this will go towards retirement savings. You can also think about some NPS investments for your retirement corpus – allocate more to corporate debt and public debt options, here. It will also offer tax breaks. However, note that NPS is a very long-term investment and locks you in for up to 60 years.

Otherwise, mutual funds and ETFs are the most suitable products for building wealth because they are versatile, well-regulated, transparent and liquid. Use a mix of equity funds and loan funds, which will help diversify your portfolio and balance risk.

Decide on the allocation between equities and debt based on your risk and timeframe – the greater the risk appetite or the longer the timeframe, the greater the equity allocation. Make sure you have large cap index funds and other large cap funds for the core of your portfolio. Add to that other aggressive funds such as multi-cap, mid-cap and small-cap funds. For debt funds, follow your schedule and choose funds whose average maturity is at least equal to yours. For the amount you plan to invest, 4-5 funds should suffice. If you don’t have the time or understanding to identify quality funds, just use index funds.

Q. I am 72 years old, single and retired. In 2016, my father had invested ₹13 lakh in Sovereign Gold Bonds (SGB). He passed away in 2018 and the bonds have since been transferred to my name. The lock-up period is over and I can redeem the bonds. Since the interest offered is very low, I decided to sell the bonds. Where should I invest the profits?

S. Srinath Rajan Srinath

A. A bit of an explanation of sovereign gold bonds first. SGBs are linked to gold prices – the issue price is calculated using the average gold prices of the last 3 business days of the week prior to the opening of the issue. The price at which the bonds are redeemed is based on the average of the closing prices of the 3 days preceding the redemption. If the price of gold is higher at the time of redemption compared to the price at issue, you realize capital gains. Therefore, SGBs are meant to be a way to invest in gold and not to earn interest income. Interest is, in effect, an additional return because other gold products such as gold mutual funds and ETFs do not have an interest component.

If you are redeeming the bonds, you may consider RBI Floating Rate Taxable Bonds. Since government bond yields are attractive at the moment, you can also invest in G-secs and secure good long-term returns (use the RBI Retail Direct platform to invest there).

Fixed deposits from small financial banks, which offer attractive rates, are another option. But as interest rates begin to rise, wait for banks to reset rates or invest in very short-dated FDs and roll over later at higher rates. If you invest in such FDs, spread them between 2 or 3 banks to maximize the deposit insurance guarantee. However, if you don’t need interest income and can take the risk, there are other options. If you understand mutual funds, you can also invest in low-risk, short-dated mutual funds. Be careful when choosing these funds – if in doubt, it is better to avoid them.

Q. I am a final year student and I was placed in a multinational. Before starting my work, I want to acquire knowledge about investment and personal finance. What courses and books would you advise me to take?

Yash Khandelwal

A. You can check The psychology of money by Morgan Housel for a general understanding of financial decision making, thinking about money, saving and spending. For a focus on the world of Indian investment, Monika Halan’s let’s talk money is a good option. That aside, you can search for various online platforms that explain basic investment concepts. Only invest in products that you understand and for which you know the nature of the risk you will be taking. Don’t be swayed solely by returns or taxation. Diversify into different products to exploit the widest range of opportunities.

(Financial advisor is co-founder, PrimeInvestor.in)

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