Q) I am working in a PSU bank, earning ₹1 lakh a month. I am currently investing ₹1,000 in HDFC MF Children’s Education fund for each of my two daughters and ₹1,000 in Tata Retirement MF, ₹1,000 in PPF and ₹500 in Sukanya Samridhi Scheme in favour of my two daughters aged 12 and 11 respectively.

I will need to save for my daughters’ marriages after 15 years and for pursuing higher education in 6 to 7 years from now.

Kindly suggest suitable investment instruments. I am paying housing loan repayment ₹22,000 for two houses. Currently, I am having three regular insurance policies of ₹3,400 each in my daughters’ names.

Jeevamathan

A) You have not stated how much more you can save. You have also not stated how much you have already saved and invested thus far for your children and retirement. Our guess is you will need to increase your investment especially if the education needs are coming up in the next 6-7 years. Continue the PPF and Sukanya Samriddhi as part of the safe investments you have and try to increase equity investments through SIPs.

Use simple index funds with underlying index as Nifty 50 or Nifty 500.I am not sure what policy you hold but it is likely that it is a money-back policy. Most of them are poor on returns and if you have crossed 4-5 years, see if you can divert it to mutual funds.

Q) I am 27 years old, and earn about ₹70,000 a month. I wanted to start investing 25-30,000 a month through SIPs. I chose debt funds, index funds and direct equity stocks for this purpose.

I want guidance on the following:

1. As the Nifty and Sensex are at all-time high, is it advisable to start SIP in Index funds or equity stocks or shall I wait for correction and then start SIPs?

2. Advise me on choosing debt funds for long-term investment (corporate bond funds, gilt funds, banking and PSU funds, dynamic funds etc.).

3. Guide me on how to allocate ₹25-30,000 between debt funds, index funds and stocks (I want equity stocks portion to be lower since I am a moderate risk taker)

4. In this all-time high market conditions, which sectors/industries are undervalued or have good chances to grow.

Brahma Naidu

A) If you are new to investing, it is a good thing to start with SIPs in mutual funds. And once you have decided to take the SIP route, you should not be trying to time the market! SIPs are meant to be run over the ups and downs of the market.

When markets fall, they will average on the downside and make good the higher averaging they did when the market rallied. So, instead of trying to time, just start your savings as early as possible. How much you should invest in equity and debt would depend on your time frame.

If this entire amount of ₹25,000 to ₹30,000 is meant for long-term investing of say 5-7 years or more, then for your age, if you can take the risk, 60-70% in equity is a good proportion to have.

Consider higher exposure to large and multi-cap index funds with Nifty 50, Nifty 500 as underlying indices and not over 20% in mid-cap indices. Overseas passive fund is good, provided they are available for investment (given the RBI restrictions).

With debt, have an equal allocation between shorter duration funds and corporate bond funds. Gilt funds will suit only if you can take low returns when interest rates rise. Else stick to corporate bonds even for longer duration.

Keep investing in mutual funds and meanwhile take time to invest in stocks. Investing in stocks is not the same as mutual fund investing.

You need to figure which ones are undervalued and which sectors have caught the market fancy. Calls given by brokerages are meant to keep your portfolio on the churn. Keep that in mind and be prepared to do your own groundwork in stocks.

(The writer is co-founder of PrimeInvestor.in)

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