Starting your investing journey is one thing and doing it right is another. Assume that your monthly disposable income is Rs. 20,000. Basically, this is the money you save after taking care of your non-discretionary as well as discretionary spending. 20k savings monthly are great and if invested well it can definitely put you on a fast track to achieving your financial goals. The best part is that as an individual investor, you would have multiple investment options. However, the bigger question that you need to address is, ‘where and how to invest’?
While making an investment plan, always remember that you should avoid cookie cutter solutions. You are a unique individual with a unique set of goals, risk profile, and investment time horizon. Your investment choices should reflect this uniqueness. Having said that, here are a few basic investments that you can consider if you were to invest 20k wisely every month.
Allocate at least 10% to an emergency: Life is uncertain and often emergencies can dig a hole in our bank account and derail us from our financial planning journey. Thus, it is always best to create a robust emergency fund that can come to your rescue in your time of need. You must ensure that this money is invested in liquid and low-risk instruments like liquid funds that invest in money market instruments.
Start an equity Systematic Investment Plan (SIP): An SIP entails investing a fixed amount of money, at periodic intervals in an instrument of your choice. Generally, equities are considered long-term vehicles of wealth creation. However, the level of risk associated with equities is also considerably higher, due to which many people avoid investing in equities. An SIP helps you mitigate some of the risk in equity investing since it entails investing at fixed intervals. As a result, you end up participating at all market levels, thereby not getting overly impacted by market highs and lows. SIPs are a great way to participate in the equity markets and reap the long-term benefits of equity investing.
Allocate a portion to debt mutual funds: When building a portfolio, you must pay equal attention to both portfolio growth as well as portfolio protection. While equity investment potentially offers portfolio growth, debt investments can provide downside protection to the portfolio. There are several debt investment options currently available in the market and you can choose the one which offers a good yield and reduced interest rate risk. However, you must avoid debt funds that take on higher credit risk since this part of your allocation is primarily to provide downside protection.
Invest in the Balanced Edge Wealthbasket: The Balanced Edge Wealthbasket creates a readymade quality portfolio that dynamically allocates and switches exposure amongst equity, debt, and gold. When equity markets are doing well, the Wealthbasket will dynamically increase exposure to equities and when markets start falling, it will automatically reduce equity exposure and increase exposure to debt investments. As a result, you are able to invest in a readymade quality portfolio, benefit from exposure to both debt and equity investments, and automate asset allocation.
While the above are investment options that you must consider if you are looking to invest 20k monthly, the amount that you allocate to each option will depend upon your risk profile and return requirements. If you are a highly risk averse individual, then you must limit your equity exposure to 20% to 30% of your portfolio. On the other hand, if you have the ability and willingness to take on risk, then you can take your equity exposure to as high as 65% to 70%.
Since we are only talking about investments in this article, we have steered clear of insurance, which is ideally a risk mitigation tool and not an investment vehicle. However, the right insurance policy and adequate insurance should also be considered while making a financial plan. The investment options shared above can help you invest 20k wisely and potentially maximise the value of your Rs. 20k.
pls give examples
I don’t think you currently have a fixed-income WB. I have edited this paragraph to remove WBs since I cannot offer an example.
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