Ask Us: On investments
The Hindu
Of the investments you already make, NPS and EPF, and PPF are very good choices to take care of your retirement or other long-term goals.
A. Congratulations on managing to save such a substantial portion of your income and making some right moves so far. Of the investments you already make, NPS and EPF, and PPF are very good choices to take care of your retirement or other long-term goals. An emergency fund equal to 8 month’s expenses is also quite adequate at this stage. While we don’t know the identity of your equity and debt funds, as a first-time investor we hope you have invested in index funds or flexicap equity funds with a good record. On the debt fund side, it would be best to stick with short duration funds that invest in high-quality debt instruments at this juncture. If you need help with choosing the right funds do use the services of a qualified financial adviser.
The only quibble we have is with your choice of insurance plans. While you will need life insurance if you have dependant family members (they will get a lump sum to compensate for loss of income in case of your death), the cheapest and best option to buy sufficient life insurance is to purchase a pure term policy. Endowment and whole life plans usually charge you a very stiff premium for very low cover and make for poor investments given their less-than-FD returns. If you have dependants (you don’t need insurance if you don’t), your current life insurance cover of ₹3 lakh is quite inadequate given your income levels.
We suggest you use online calculators to work out the right amount of life insurance for yourself and buy a pure term policy online. You can discontinue your high-cost endowment and whole-life plans and redeploy the money in term cover or other investments. As the next step in your investment journey, you should map out your financial goals and the horizons by which you would like to achieve them. Refer URL / scan the QR code alongside to learn how to go about it. As your career graph and income rise, try and step up investments in tandem.