BackThere are limited investment options for short-term needs
Bank fixed deposits, ultra short-term and short-term mutual funds are a good option
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I’ve just started working and am living with my parents as I have been posted in my home town. This allows me a decent amount as savings. There’s no money worse than idle money, and I want to start investing can go about saving this money? this money. Could you tell me how I
—Anant Maheshwari
You are very right in saying “no money is worse than idle money". And while most of us know this, there are not many who follow this principle. And it is indeed good that you not only understand it but also want to start putting your money to good use. You have the advantage of staying with your parents, hence the funds available for investment will be more than normal. So, use it to your advantage and start building your corpus. Even if your job makes you move to another city, you should continue saving though the savings rate may come down.
This brings an important aspect of savings to the fore: regular and consistent savings. Make savings a habit. When you start treating savings as an expense in your monthly cash flows, you will know that it has become a habit.
As you have just started your career, your investments can be distributed among various baskets. You will have needs which are short-term and you may want to put some money aside for the medium term as well as long term. The investment strategy will be dependent on the horizon of needs. Very simply, you should not take any risk with the investments that are meant for the short term and cannot be locked in for a longer duration. Investments that are meant for the long term, you can have a longer lock-in for those and you take some risk as well.
Here you need to first check your risk capacity, i.e., whether your finances permit you to take risk, along with your risk appetite. You need to see whether you as a person are comfortable taking risk and this will determine the kind of investment you should be making.
If your needs are short-term, the investment options are limited. Bank fixed deposits, ultra short-term and short-term mutual funds are a good option. If the investment horizon is of, say, 2-3 years, then bank fixed deposits maturing in accordance with the need of funds, along with monthly income plans are good options. In case of long-term needs (which are more than five years away), you can consider equities as an asset class through prefer mutual funds. But this will again be subject to your risk profile as mentioned above. In case you are not willing to take higher risk, you may consider hybrid funds, which take an exposure to equity as well as debt.
In addition to the above, you should also have adequate health insurance for yourself, even if your employer is providing you a medical cover.
Queries and views at mintmoney@livemint.com
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