Ask Mint Money | To get exposure to different sectors, consider diversified funds

Ask Mint Money | To get exposure to different sectors, consider diversified funds

I am 27 years old and earn 1 lakh per month. I have been investing 5,000 per month in HDFC Top 200 and DSP Top 100 for over a year and want to start investing in funds specializing in banking and infrastructure sectors. I have a life cover for 20 lakh and a health insurance policy for 5 lakh. I also invest 70,000 in Public Provident Fund (PPF) per year. I want to invest in a debt instrument or a pension fund. Please advise.

—Ravi Tulsiyan

I retired a year ago. Assuming that a couple needs about 25,000 per month, liabilities being settled, and an expected life span of 25 years, I have the following investment strategy: PPF (10%), Senior Citizen’s Savings Scheme (10%), fixed deposits (20%), fixed maturity plans or FMPs (20%), monthly income scheme (10%), equity and equity mutual funds (30%). There is no tax liability at this level. Is this strategy okay? If one has more than 25 lakh, what should be the strategy ?


Firstly let me give you the credit of doing what many people at your age will not be able to do. I will propose a few changes, however. Firstly, you cannot contribute more than 70, 000 per annum in PPF; a couple can contribute 1.40 lakh. This will translate to around 5.6% of the portfolio. At the same time, we also don’t want too much exposure in this asset as besides the long lock-in, there is no regular flow of income.

Since there is no tax liability, there is no need to go for an FMP. A fixed deposit is better as it gives an additional advantage of liquidity, which is a bit of challenge in FMPs. Further, it is better to stay with equity mutual funds and not consider direct equities unless you really want to invest directly. If that is the case, it is advisable you limit the amount to 10% of the portfolio. Also you need to make sure your health insurance is in order and you pay the premiums on time. In case the corpus capital is more or less than what you have mentioned, the asset allocation should remain the same.

Surya Bhatia is a certified financial planner and principal consultant, Asset Managers

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