I am 27 years old and my net salary is Rs 25,000. I plan to change my job in the next two months. I also plan to buy a house in the next three years. I can save Rs 30,000-40,000 every two-three months. Suggest instruments in which I can put money for three-five years. My investments include two unit-linked insurance plans (Ulips) with Rs 18,000 and Rs 10,000 annual premium, and gold worth Rs 75,000 bought one year ago. I also put Rs 50,000 every year in Public Provident Fund (PPF) and Rs 3,000 every month in mutual funds through systematic investment plan (SIP). I also have a fixed deposit worth Rs 1 lakh maturing after three years.
If you consider buying a property over the next three–five years and taking your age into account, it is recommended you take a higher exposure to equity. You are already investing Rs 3,000 through SIP. The same needs to be increased to a total of Rs 10,000. Choose funds from the diversified and hybrid equity-oriented category. Funds such as HDFC Top 200 and DSP BlackRock Top 100 from the diversified stable and HDFC Prudence and Tata Balanced from the hybrid category are good picks. Assuming you have a five year horizon, plan to do the monthly investments for a four-year period and use the last one year spread to switch the equity portfolio towards debt. Also do an active check of how the schemes are performing and compare it with its peer group and find out if any scheme needs to be replaced due to non-performance or change in objectives.
Also, check how many premium years your Ulips have completed and whether it is feasible to redeem the same considering its expenses, surrender charges and how the same have performed.
You can continue putting money in PPF. However, you may not be able to redeem the same as PPF has a maturity of 15 years. While you can partially withdraw the same, it is not advisable. However, you can weigh your options at the time of buying your property.
For your fixed deposit, assess what you will get if you go for a premature withdrawal and consider opting for a fixed maturity plan (FMP). It may turn out that doing an FMP may be more cost effective and may earn a higher post-tax yield. Gold as an asset class has done well and you can continue holding the same.
Surya Bhatia is a certified financial planner and principal consultant, Asset Managers
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