I am 26 years and a government employee. I earn around 32,000 per month. I have around 4 lakh in savings and around 10 lakh in fixed deposits (FDs). I live in our ancestral house and have a car. I have 75,000 in Public Provident Fund (PPF), which I opened this year. I have invested in HDFC Equity ( 50,000), SBI Contra Fund ( 50,000), UTI MIP ( 48,000), SBI PSU Fund ( 20,000) and Reliance Equity Opportunities ( 30,000). I have a traditional plan for which I pay an annual premium of 28,000 and I pay another 1 lakh for a traditional plan. I have no liabilities as I am unmarried and my mother gets a pension. I also plan to invest around 5,000 per month in National Pension System (NPS) and long-term bonds. Suggest some bonds. Do I need to change my investments?

—Shankar Upadhyay

It is good to see that you are serious about your savings.

There is no need to have a large balance in your savings account. Also, assuming you have a long-term investment horizon, FDs are not the best instrument. Instead, for this pool of money, you can look at a combination of monthly income plans (MIPs), FDs and short-term funds. Among MIPs, HDFC MIP and Reliance MIP are good options. This investment is predominantly debt and gives you an equity exposure of 15-20%.

For mutual fund (MF) investments, you can consider getting out of SBI PSU fund and UTI MIP. Instead you can consider hybrid equity funds. Good options in the space are HDFC Prudence, HDFC Balanced, and Birla Sun Life 95. You should consider starting monthly investments in all your MF schemes. One of the best ways to save over long term is through systematic investment plans. It will not only help you create a saving habit, but also help you tide over volatility in equities over the long term.

Also, make sure you invest regularly in PPF. NPS is a good option. You can opt for higher equity participation within NPS.

I have started preparing for higher studies in management. To cover the costs, I want to invest a part of my earning for a year. My gross salary is 25,000 per month. I can spare between 15,000 and 20,000 for the purpose. Suggest me some avenues.

—Pritam Singh

You have not mentioned the period for which you plan to save as well as when you will need the funds for pursuing your higher education.

Assuming you have a one-two years’ window, you should consider starting a recurring deposit for the desired period. You currently come under the lower marginal rate of tax and hence the deposit will be taxable (the interest portion).

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