I am a probationary officer in a bank. I have just started my career. I get Rs 21,000 a month in hand after deductions. I have SIPs of Rs 1,000 a month in a Canara Robeco fund, which will run for three years. I also have two recurring deposits of Rs 1,000 a month each in the same bank. I hold an LIC policy and have a public provident fund account. I am single.

What should I invest in: gold, land or mutual funds?— Harshit

Congratulations on your new job. We appreciate your interest in kick-starting investments at a young age. Starting early will make it that much easier to achieve your financial goals. Sample this to know how starting early will make a big difference to the amount you have to save: if you invest Rs 5,000 a month in mutual funds for the next 20 years, you will have Rs 75 lakh in hand by 2032, if the funds manage 15 per cent annually.

Now if you start this investment after five years in 2017, and want the money by 2032, you will need to save a much higher Rs 11,500 a year to reach the same target of Rs 75 lakh. The power of compounding is at its best when you start early.

Balanced portfolio

Try to gradually set for yourself financial goals such as wanting a certain amount of money as capital to buy a house or a fixed sum for retirement and so on and then start saving.

Now moving to your query on where to invest, you should have a combination of equity, debt, gold and real estate if you want to achieve a well-balanced portfolio. If you do not own real estate and can spare a lump sum for land (banks do not offer loans for merely buying land), you can consider investing in it, if you have the risk appetite.

Between equity and debt, you can go for 60:40 or even 70:30 allocation, based on your risk appetite. Recurring deposits are useful tools to save regularly but are not tax-efficient as the interest accrued is taxed. Public provident fund is a good debt option. You will enjoy tax deduction on the investment made and will also enjoy tax-free interest. Invest regularly in this to save tax. Also have a simple term-policy cover on your life, especially when you begin to have dependents.

Every fund house offers several schemes. You have not stated which scheme of Canara Robeco you hold. Try to understand the scheme features and know whether it will suit your risk appetite. A mid-cap fund, for instance, may have high risks as they invest in stocks of medium and small companies. A large-cap fund may be relatively less volatile. Read up more on mutual funds and make informed decisions. Do not go by what your agent says or simply invest in the fund because it is a group company of your bank.

Assess what your surplus is and allocate some portion of it to invest regularly in equity funds using systematic investment plans (SIPs).

We suggest you hold Canara Robeco Equity Diversified. It is a diversified fund with some large-cap bias. It makes for a good starting point. You can also hold Quantum Long Term Equity and HDFC Mid-Cap Opportunities. You can ensure anywhere between Rs 1,000 and Rs 5,000 in each of these funds over the years. Do not invest over 20-25 per cent of your total SIPs in the mid-cap fund. You can consider 5-10 per cent of your savings in gold funds such as Reliance Gold or Quantum Gold.

As your savings increase gradually, you can consider holding five to eight funds. Track their performance periodically and exit if they underperform their benchmarks.

Queries may be e-mailed to > mf@thehindu.co.in

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