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Business News/ Money / Personal Finance/  How to optimize investment strategy for future planning?
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How to optimize investment strategy for future planning?

All your goals are long-term in nature and so you should consider investing in the stock market.

Top Mutual Funds for SIP to Invest in 2024 : SIPs are the favoured investment avenue for gradual wealth accumulation with minimal risk exposure.Premium
Top Mutual Funds for SIP to Invest in 2024 : SIPs are the favoured investment avenue for gradual wealth accumulation with minimal risk exposure.

I am 44 years old and have two children, aged 11 and 8. I own life insurance policies that offer guaranteed returns of 5.5-6% per annum, including bonuses. I’ve been paying premiums for three years now and have four more years of payments remaining. My rental income stands at 40,000 per month from two properties, with an EMI of 28,000 for one of them. While I have not directly invested in the stock market or mutual funds due to perceived high risks, I want to ensure that my approach is sound.

—Name withheld on request

Your investments in real estate and life insurance policies are not easy to liquidate. You must try to evaluate the returns your real estate investment is giving along with the rental yield. Many investors look at it from an absolute returns’ perspective and not annual returns. When they calculate annual returns, they get to know the potential returns from their property investments. You should also factor in the interest you are paying on your loan to build one of the properties. If you factor in this part, the returns from your real estate investment will reduce. The returns from life insurance policies are closer to that of low or mid-duration debt instruments.

As for investing in stock markets, there have been multiple analyses where the possibility of negative returns is extremely rare if the investment is held for more than 5 to 7 years. All your goals are long-term in nature and so you should consider investing in the stock market. One of the best ways to do so is to invest in equity mutual funds. This will also allow your portfolio to generate higher returns over the long term and also bring the element of liquidity which is missing in your present portfolio. You can redeem your mutual funds at any time in case of an emergency.

It will also add a very important aspect of diversification to your overall assets. Since you will be investing in mutual funds for the first time, you can look at starting your investment in UTI Nifty 50 Index Fund, Nippon India Growth Fund , ICICI Prudential Bluechip Fund, Parag Parikh Flexi Cap Fund and HDFC Large & Mid Cap Fund.

Harshad Chetanwala is a co-founder at MyWealthGrowth.com

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Published: 31 Jan 2024, 11:24 PM IST
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