Qn. I am a 23-year-old who has recently joined the private sector workforce with a salary of ₹30,000. From this, I have decided to invest ₹6,000 per month.

As I am completely new to the field, I have decided to start a PPF account and am looking to invest in SIP mutual funds. As a fresher in this field, can you guide me on how to diversify my portfolio? I’m looking for long-term investments and don’t have any immediate requirements as of now. Can you explain where and how to invest? Any help would be appreciated.

George Sebastian

Ans. You have made a good start with PPF. You can consider starting with simple index equity funds that have Nifty 50 or Nifty 500 as the underlying index and slowly add Nifty Midcap 150 index fund. Index funds mirror the key benchmark indices in the market and remove the trouble of having to find active funds.

They are also low cost and ensure you do not pay a hefty fee to the intermediary. If you plan to invest for the long term (7 years or more), you can consider investing anywhere between 50-70% in such funds and add simple short-duration and corporate-bond funds for the debt component for the 30-50%.

As your savings increase, you can add small component in gold funds and international funds. Work with a goal. Shorter the time frame, lesser the equity to ensure you do not burn your fingers in the market. Do not stop SIPs even when markets fall. Continue with them as they will average prices for you when such falls happen.

Qn. I am 26 years old working in an IT company. My annual CTC is ₹29,50,000. Can you please help me with effectively planning my salary for meeting my expenses and also for investment, and savings.

How much should I save for my daughter who is 3.5 years old now? How much should I start investing for my retirement?

I have very limited knowledge of finance. It would be helpful if you could guide and help me with a chart on how much percentage or amount I need to spend, save, and invest.

Anand Mathew

Ans. You have all the right questions that will help cement your financial journey!

But there are no cookie-cutter solutions. First, you need to assess your monthly cash flow towards expenses, including any loan commitments.

Online calculators

Then, you need to figure (using online calculators) how much you need for retirement and for education, as a rough estimate. You should have a reasonable return assumption (a little more than thedeposit rate in the absence of initial understanding of how markets return) and then see what the calculators throw as your required savings. You will then need to take a relook at expenses if your savings seem inadequate for these goals or work towards steadily increasing such savings. Index equity mutual funds, debt funds and PPF are simple ways to start with.

To get a better grip of personal finance, you can consider reading books such as Let’s Talk Money by Monika Halan. Start using calculators that will tell you how much to save (at an assumed rate of return) to reach a specific goal in a certain time.

Investment advisor

If all this is not up your alley, the other option is to go a fee-based investment advisor/financial planner (this means you pay a fee for their services. They do not earn any commission for the product they sell. Do not confuse them with distributors/agents/bank RMs) who will help you assess cash flows, draw a detailed financial plan, and help you choose the right products to invest. Given your high-income status at a young age, this is well within your reach and will avoid a lot of hassle and wrong decisions.

Always remember ‘free financial advice’ is seldom free of bias. Even if you seek an advisor, be financially aware by learning more.

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

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