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Whenever your salary increases, so should your investments, after taking into account the expenses (iStock)
Whenever your salary increases, so should your investments, after taking into account the expenses (iStock)

Start investing for the long term as soon as you get a job

The advantage you get at a young age is a disciplined approach along with the benefit of compounding

I am 28 years old and my current in-hand salary is 91,000. I am paying 12,500 for a health insurance policy of 20 lakh and 8,224 for a term insurance plan of 1 crore. I have systematic investment plans (SIPs) in the following funds: 1,500 each in L&T Midcap, Axis Long Term Equity and Aditya Birla Sun Life Tax Relief 96; and 500 in Nippon India Small Cap. Currently, my mutual fund investments are worth 1 lakh. My fixed expenses are 50,000 with zero debt. I expect my salary to increase by 10% a year. My annual bonus for the current year in 2 lakh, which increases each year by at least 15%. I want to buy a house in 15 years. What goals should I plan for? How much should I be investing each month?

—Name withheld on request

It is good that you have started to save at the start of your career. The advantage you get at such an age is a disciplined approach along with the benefit of compounding.

At your age with fewer responsibilities, the savings rate can be higher. You can save the surplus of your income over expenses. In your case, that is 41,000 per month. Your bonus should also be invested. Whenever your salary increases, so should your investments, after taking into account the expenses.

A few financial goals are common to most. For example, at your age, it could be marriage expenses and buying a house for yourself. Going forward, it could be your children’s education and retirement. These may seem far-fetched right now but over time you will start planning for the same. To start with, your focus should be investing for the long term, creating a corpus for short-term goals, if any, as well as putting in place a contingency fund.

Among your existing schemes, the mid-cap and hybrid fund need to change. You can also opt for a multi-cap and large-and-mid-cap fund with the intention of diversifying the portfolio. Mirae Asset Emerging Bluechip, Canara Robeco Emerging Equities and UTI Equity funds are good options.

Surya Bhatia is managing partner of Asset Managers. Queries and views at mintmoney@livemint.com

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