I am 45 and earn Rs.1.7 lakh a month. I am expecting a salary hike of about 20% this year. I put in Rs.5,000 a month for a life cover, and in total, I have invested about Rs.1.5 lakh across three equity mutual funds (MFs). Further, I have another Rs.15 lakh in two fixed deposits, and Rs.10 lakh in my savings bank account. I want to buy a house in another 10 years, and I need around Rs.15 lakh for this. My monthly expenses come to Rs.50,000 a month. Can you suggest an investment plan for me?
—Manish Shrivastav
Your potential to save is quite good. One way to begin could be to just start investing. But it may not be the best of strategies and that’s what you have been doing with your investments. A better way would be to determine your financial goals and categorise them as short- and long-term needs. Next step would be understanding your risk tolerance level—how much risk you can take based on your financials and risk appetite, and how much risk you are willing to take. There are many online questionnaires available that can help in determining your risk tolerance, especially risk appetite. A simple question could be “how would you react if investments meant for the long term go down by 20% within six months of your investment?” Your reaction would determine your appetite. If you cut your losses and transfer investments to safer asset classes, then you have a low risk appetite. On the other hand, if you know these asset classes come with inherent volatility and accept decline in portfolio value as a part of investing and therefore keep the investments the way they are, it means you have high risk appetite. In such a case, only the investments meant for long-term goals will be invested in asset classes with high risk.
