Q. I have been running a monthly SIP of ₹10,000 towards SBI Nifty Index fund for the past year. Now, I can invest another ₹10,000 a month. Should I invest in another moderate risk fund or continue with the Nifty fund alone? Should I also invest as lump sum instead as it lets me invest on a date of my choice, preferably when the NAV is lesser?
A. For a ₹20,000 monthly SIP, just 2 funds are too few. It is best to split the additional ₹10,000 in two funds. If you do not have other debt investments, make one of these funds a short-term debt fund. As the passive options in the moderate-risk space is limited, go for an active fund from the large, flexicap or value categories. If you can take some more risk, you can instead add an aggressive index fund that tracks the Nifty 500 or the Nifty Midcap 150. You can go up to ₹4,000 in these funds. It is best to use the SIP route to invest. Market highs and lows are clear only in hindsight. Markets can keep rising, or keep correcting through the month. Pegging a ‘good’ or ‘low’ NAV to invest on is not feasible.
Q. I’m a 28-year-old State government employee. What are the best options for investment?
A. It’s hard to answer this without more detail, so here are some general guidelines.
One, consider the purpose for which you intend to invest — such as for a home down payment, buying a car, retirement, or for regular income from the investment. Two, keep in mind the extent of risk you can bear. Generally speaking, for investment horizons of 5 years and longer, opt primarily for equity mutual funds as they allow better returns than FDs or gold. The higher the risk and longer the time-frame, the more you can allocate to equity funds (but don’t go beyond 80% in these). The rest of the allocation can be in short-duration or corporate bond debt funds.
For shorter-term goals, fixed deposits from banks and small finance banks are good options, especially if you are in the lower tax brackets. You can also consider very short-term debt mutual funds. For retirement, products such as EPF are good. Given that you are a State-government employee, you may be eligible for other pension or medical benefits so do bear that in mind.
Q. I am a senior citizen. Encouraged by the higher interest I received on an FD parked in a NBFC rated FAAA/ Stable by CRISIL and MAA+ with Stable outlook by ICRA, I intend to invest ₹10 lakh as a cumulative deposit in this NBFC for 3 years. Do you think I would be acting wisely? Also, is there a free-look period for deposits in NBFCs too?
A. There is not much we can say without knowing the NBFC or the coupon on the deposit. Take a call based on two factors — one, whether the coupon compares favourably with similar-rated NBFCs, small finance banks, banks or even central and State government bonds, which are sporting good yields now. If so, you can invest. Two, how much does this ₹10 lakh account for in your overall investment? A higher share is avoidable. In such a case, invest partially in the deposit if the interest compares well and invest the remaining in another option. There is no free-look period in deposits.
(The adviser is Co-founder, PrimeInvestor.in)