Q My husband and I reside in Surrey, British Columbia, and save $700 CAD a month. We are eager to embark on a journey of financial planning and investment. Can you provide us with insights on how to begin this journey?

As we are an Indian-origin couple living in Canada, we are uncertain on whether we should save and invest our money here in Canada or consider options in India. Are there specific advantages or considerations we should be aware of regarding the locations?

Sonia and Raman

A Please start reading up on the basics of personal finance and goal-based investing. Do this after taking a decision on where you plan to invest. You need to have some idea on whether you plan to reside in Canada for long (or permanently) or just for some years. If it is the latter, then you can invest in India. Otherwise, please seek a financial planner’s help in Canada and start investing there. The reason is there are very few options - outside of stocks, PMS - for an NRI from U.S. /Canada for India investment products. For example, many mutual funds do not have option for U.S. /Canada NRIs to invest due to the regulatory hassles of filing to the securities board in these countries (the few MFs who allow often make it hard to get it started). Similarly, many government options are not available for NRIs in general. So, your options remain NRE deposits in banks besides direct stock investing and using services like PMS (portfolio management services).

So, kindly consult a planner in the place where you plan to settle down. Do not be misled by products sold by bank relationship managers. They may not even be the best for your situation.

Q I am 31 and a State government staff earning a monthly net of ₹65,000. I am now investing ₹40,000 a month in four mutual funds. Two with monthly investment of ₹10,000 each are equity oriented — the first with a five-year time horizon for purchase of car and the second with an investment horizon of 20-25 years for capital appreciation. The third with monthly payment of ₹8,000 is an ELSS for tax saving.

The fourth scheme (₹10,000/month) is a debt hybrid fund with an investment horizon of 10 years for children’s education. After investing, I am able to provide for family with ₹25,000. Is the investment strategy right?

Suranjoy Athokpam

A In general, for any goal, having an asset-allocation approach will help. Near-term goals should have less equity and long-term goals more (as your ability to take risk is higher over the long term). Use the ELSS together with the fund you have for capital appreciation as part of the 20–25-year goal portfolio. Have some amount as goal for this period (use online calculators to know how much to save) and work towards that. Let this be 70% of your total portfolio. As savings rises, add another fund, preferably a simple index fund with Nifty 50 or Nifty 500 as underlying index.

Divert 30% of savings towards short-duration and corporate-bond debt fund. This can have 70:30 equity debt.

You can cut debt by 20% and add a gold fund for 10% if you wish to. If you have a goal with a 10-year time frame, a hybrid debt option will generate just a little more than deposit and is tax inefficient. Instead, use simple Nifty 50 and Nifty mid-cap 150 index funds for 60-70% equity and balance in debt funds like the ones mentioned above.

Here also, please use online calculators to estimate how much to save for children’s education so that you can work towards the goal. Stick to index funds for equity whether investing via distributors or buying them online unless you have sufficient knowledge of MF performance. It will save you the hassle of constantly reviewing if the funds are doing well and provide you options at low cost (passive funds mirror the index and hence, are much lower in cost than active funds).

(The writer is co-founder, Primeinvestor.in)

In ASK US column of Sept. 18, interest payout on RBI Floating Rate Savings Bond must be half-yearly and not quarterly as printed. The error is regretted.

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