I am a freelance photographer and earn about Rs.10 lakh annually. However, my income is irregular and and at times I have to depend on my savings. I have Rs.4 lakh in my savings account and Rs.3 lakh as fixed deposit (FD). Please suggest funds where I can invest. Also, are there instruments in which I can invest irregularly?
The concern of erratic income is actually shared by many and this becomes a hindrance in saving regularly. Since your income stream is not under your control, the key lies in controlling the expenses as well as to have a cash flow that helps in determining when you need the funds and how you can optimize its usage.
To start with, you need to draw your monthly cash flows—your expected income (even if it is irregular) and your expenses that you can reasonably predict. To protect against irregularities in income, you need to provide for the months where you may not have any income or low income. Here your existing investments will come handy. So from the existing funds, you need to keep provision for a couple of months. This provision is to be invested in such a manner that the funds are available at call. Here you can consider investing in bank FDs of shorter duration or liquid funds via mutual funds. The advantage with liquid funds is that you can redeem the same at will, while the investments yield you a return. However, you need to ensure you top-up the liquid fund whenever you have used some amount to maintain the required back-up.
Once you have done this, you can plan your other investments. You can start systematic investment plans (SIPs) with smaller amounts. Whatever surplus you generate can be invested at periodic intervals. You can start with an asset allocation that is more on the debt side. You can start SIPs in hybrid funds, where Tata Balanced Fund and HDFC Balanced Fund are good options. Also, consider monthly income plans (MIPs), which have an equity exposure of up to 25%; here funds such as Reliance MIP have a good track record. In the pure debt space, short- and medium-term debt funds are recommended; consider funds such as Templeton Short Term Income Fund and Birla Sun Life Dynamic Bond Fund.
I have just begun my career and I can save up to Rs.18,000 per month. Please advise.
It is good to see you are serious about your savings. As you are young, it is recommended you divide your savings based on your short- and long-term goals. The short-term goals can be achieved by investing in safe asset classes such as FDs, recurring deposits and debt mutual funds. For long term needs, consider Public Provident Fund and equity mutual funds. You need to ensure you maintain the investments based on your needs and if you are able to do it, it will hold you in good stead over the long term.
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