I am 23 and my in-hand salary is ₹26,000 per month out of which I save ₹10,000. Please recommend where to invest for my long-term goals—building a home and buying a car. I buy a few equity shares every month. Is it recommended to do so or is investing in mutual funds better?
It is good that at such a young age you are saving regularly as well as saving a high percentage of your income. You are currently investing directly in equity stocks on a monthly basis. This is also equivalent to an SIP (systematic investment plan) wherein you invest a fixed amount every month on a fixed day. In an SIP, the scheme remains the same, but in case of stock buying, you may invest in different stocks in different months. This will depend on whether you are investing based on your own research or a broking house is helping you execute the same or if you have identified a few stocks to invest in on a regular basis.
While equity is surely the way going forward considering your age and the financial goals, how you buy in equity is important.
Direct stocks work very well if done with adequate knowledge and research or under supervision and guidance. So if you believe that you can do this, then you can continue investing in equity stocks; else it is recommended that you go via mutual funds. These are managed professionally by fund managers and are also a cost effective way of investing in equity as well as in debt instruments. Once you have identified the schemes across various categories available—large-cap, multi-cap, mid-cap and even small-cap schemes— you can invest in a structured manner through the SIP route.
Surya Bhatia is managing partner of Asset Managers. Queries and views at firstname.lastname@example.org