I am a 33-year-old professional working in an MNC. Till now, I have only invested in FDs and PPF. Now I want to enhance my investment portfolio because of increase in responsibilities after marriage and childbirth. Please suggest good investment options considering that I have a low to moderate risk appetite. Can I earn 12-15 % returns annually? Is NPS a good option?
Dev Ashish, Founder, StableInvestor and Sebi-registered investment advisor replies: Being young, you are now rightly exploring suitable investment options to generate inflation-beating returns. For medium-term goals (5-7 years), you can have 30-40% equity exposure given your low-moderate risk appetite. For longer-term goals, go for 40-50% allocation to equity. For equity funds, pick one or two large cap Nifty or Sensex-based index funds, one or two flexi-cap funds and/or large-and-mid-cap funds.
Link all your investments to your financial goals and then decide on allocation. Focus on few important goals and figure out how much to invest every month. It’s possible to generate an average of 12-15% returns over long periods of time from equity, but you won’t get such returns every year as stock markets don’t move in a straight line. And if you plan to invest via regular SIPs, lower your post-tax return expectations from equity a bit to something like 10-12%.
NPS is also a good option to accumulate a retirement corpus but comes with a long lock-in and mandatory annuitization of a minimum of 40% of the corpus. This illiquidity and restriction may not suit everybody. Though its low cost and allows easy allocation management via active and auto choices, I would suggest focusing more on equity funds and EPF (+VPF & PPF) first for retirement. If you still have more surplus left, you can then consider taking the NPS route. If you are unsure about how to manage all your goal-based investments and invest in suitable products, do take the help of a Sebi registered investment adviser.
