Mutual Funds

Your Fund Portfolio

Parvatha Vardhini C | Updated on August 25, 2019 Published on August 25, 2019

My monthly take-home salary is ₹54,500, out of which I give ₹30,000 to my parents (senior citizens) every month. I am 32 years old and unmarried. Can you please guide me on how I can save, invest in equity and mutual funds so that I will save on income tax also. I have a monthly recurring deposit of ₹10,000, a PPF of ₹1 lakh and an LIC policy for which I pay a premium of ₹36,000 per year.

Shruti Parab

After taking care of your parents’ needs, you have a surplus of ₹24,500 every month. From this, you are investing ₹10,000 a month in recurring deposit. That doesn’t leave much room for making additional investments, as you will need to hold some money for your personal expenses as well as any emergencies.

Since you are already investing in PPF which is a good debt instrument for long-term savings, you can probably redirect the whole or a part of the sum you are currently investing in the RD to SIPs in mutual funds.

Assuming you can redirect the entire ₹10,000, you can choose the following funds: Invest ₹3,500 each in Mirae Asset Large Cap and ICICI Prudential Equity & Debt Fund, and ₹3,000 in Axis Long Term Equity. As the name suggests, the Mirae fund invests in lower-risk large-cap stocks; ICICI Pru Equity & Debt is an aggressive hybrid fund which can invest up to 35 per cent of its portfolio in debt. This strategy helps cushion the downside when the stock markets fall or are choppy. We have suggested one tax-saving fund — Axis Long Term Equity — since you have specifically asked for one. This, along with your PPF, insurance premium, as well as EPF (if any) should help take care of the Section 80C deduction.

If you wish to continue with a part of the sum in RDs, reduce the investment in each of the above funds proportionately.

Once your investible surplus increases as your income moves up over the years, you can consider investments in direct equity if you have the risk appetite. It is best avoided in your current situation.

Also, it is not clear what type of insurance policy you have signed up for. It is always better to not mix insurance with investment. Life insurance should purely be a cover for loss of life and, hence, a term insurance alone should suffice. Premiums are also lower here, even for a high sum assured, as it is just a plain-vanilla cover which will compensate the dependents for loss of life of the insured during the policy period. It is advisable not to go for traditional policies as the premiums are high and the returns are not attractive. By choosing a term policy, you might also be able to free up some of the money that is currently going towards the premium to other investments such as mutual funds.

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Published on August 25, 2019
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