Gone are the days when investment includes: FD’s NSC’s Post office schemes/KVP,
PF, etc.
Now the investment horizon have widened, and the options available are:
All of the above mentioned alternatives
Mutual funds(equity / debt/ diversified)
Equity markets
Debts(GOI bonds/ Corporate bonds)
But the investment story becomes more complicated by all these options, and million dollar question remains how much money to invest in which alternative.Here is my view point in question answer form:
Question 1: How much debt how much equity?
As rule of thumb the equity should be=100 - your age, i.e. if ur age is 30 invest 100- 30= 70% of the money for investment in equity.
Question 2:In equity how much in individual stocks and how much in mutual funds.
if u are not into stock market it is advisable not to invest into individual stocks and opt for mutual funds as experts are there to keep care of ur money, but then also if u want to invest in any individual stock then invest only in fundamentally strong company and and sector which is defensive in nature eg. oil refining.it has been seen that reliance share over the years has been safer(less risky) than corporate bonds
if u r into stock market then it is advisable to invest 50:50 money into mutual fund and individual stocks.
if u r full time into stock market then no need for mutual fund and u even dont need to read this.
Question 3: in mutual funds how much equity mutual funds, how much debt and how much diversified?
generally try to go in for diversified MF if u r a long term investor, in that category also try to avoid sectorl funds which are cyclical in nature( eg. metal industry funds return depends on prices of steel etc, which can wash away ur profits in one down cycle)
Question 4: which is better NFO( new fund offer) or existing one?
generally people thnk NFO is for 10 Rs only so is cheaper, or they will get more number of units, but it makes no difference because its the money thats going to be invested not the units, so existing funds are always better than NFO as u already have an idea about the past performances of fund manager.
Concluding the article the ideal investment mix would be:( for numbers sake say for a 30 year old person)
PF(12% of ur basic+ DA) its a Govt rule, you cant do any thing about it.
30% of ur remaining money for investment into GOI bonds/ debt instruments
70% into equity thru Mutual funds and directly buying individual stocks.
in MF’s u can go in for equity, diversified, sectoral funds, index funds, etc.
There is also a option of investing in super annuation fund provided by ur employer but its technically same as mutual fund i.e. some one else is investing ur money
Assumptions:
I have not considers saving bank account as investment as it is generally used for expenditure
I consider FD’s to be as safe as GOI bonds so I dont consider FD’s
Happy Investing