Being a salaried individual who has invested only through the provident fund so far, I now have ₹1.5 lakh available each month to invest. What investment avenues should I consider across low-, medium-, and high-risk instruments to build a corpus of over ₹1 crore in the long run?
Name withheld on request
Good to know you have been saving in a very disciplined manner. However, despite the discipline maintained, your portfolio has clearly lacked the diversification and high-growth potential that other asset classes offer.
Though the last few months might have proven your stance to be better than others’, make no mistake that, over the long term, equities have and would generate better returns than fixed-income avenues like PFs.
Not to undermine provident funds and other fixed-income instruments, as they provide a much-needed anchor and stability in the portfolio, especially in these times. So, coming to where you should invest to maintain a healthy mix of stability and growth, these are some options:
a) 70% of your investments should go into mutual funds, which can be distributed between flexi, multi-cap, balanced advantage and multi-asset funds.
b) 5% could be invested directly into precious metals.
c) The residual can be invested in a mix of PF, and you could also look at some PPF for retirement planning
d) Outside of this, you should aim to build a 12-month emergency corpus, which should be parked in liquid instruments like bank deposits or liquid funds.
A few further aspects that you should keep in mind, which will ensure that you do not deviate from your target objective:
1) Ensure, as above, that the emergency funds do not get diluted and moved into anything apart from liquids.
2) Do not panic, especially in poor market conditions—the next few quarters could be highly volatile and might test your patience.
3) If possible, do a step up on your investments every day by at least 10% to have a further buffer for the target corpus.
4) Ensure you have your medical insurance and life insurance in place that help you not touch this corpus.
5) Choose mutual funds that have a good pedigree and fund management. Avoid choosing funds solely on past returns.
You have made a good start with a reasonable monthly saving and do not deviate from your track.