I was recently quoted in Economic Times WEALTH (13-19 November 2023) in the Q&A section where a panel of experts answers readers’ questions related to various aspects of their personal finances.
The exact question and the answer –
Here is the text version of the query and the reply –
Q – I am 28 years old with a monthly salary of Rs 1 lakh. I don’t have any liabilities right now. I am looking for long-term investment options to build a multi-crore corpus. I’ve been investing in PPF for nearly 10 years now and will continue to do so. Please advise on how much I should invest monthly?
A – While it is commendable to see the intent to build long term wealth generally speaking, it is also advisable to assess your financial goals, find out how much you need to invest for them, and then follow a goal-based approach to invest. Coming to the query at hand, your monthly income is Rs 1 lakh but your expenses are not known. For the sake of discussion, we shall assume you are able to save Rs 60,000 per month.
Now considering the long investment horizon that you have, it is suggested to have a higher allocation to equities to generate inflation-beating returns. For that, pick one scheme each from mutual fund categories like Largecap Index Fund (Rs 15,000 monthly), Flexicap/Large&Midcap fund (Rs 20-25,000 monthly), Midcap Funds (Rs 7500 monthly). Though not necessary but if you really want to have some standalone smallcap exposure, then just limit yourself to one smallcap fund. This should be sufficient to provide adequate diversification for your equity allocation. In addition, you can invest Rs 12,500 monthly in PPF also (which totals to Rs 1.5 lakh per year) as you also mentioned that you have been and plan to continue investing in PPF. You can also go for increasing your VPF contributions (in EPF) as the same offers higher 8.15% versus PPF’s 7.1%.
Also, as your income increases, try to increase your monthly investments every year. You can also channelize a major part of your annual incentives towards your portfolio if you don’t need it for other expenses or family requirements.
Apart from PPF, no details of your other debt investments have been provided. But I am assuming that you have set aside some money as emergency fund in bank FDs or debt funds. If not, then please do so soon. And don’t make one large FD and instead keep money divided in 3-4 smaller FDs so that you don’t end up breaking one large FD even if your fund requirements for a small emergency are smaller.