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Got a question about your money? What you should or should not do with it?
Our expert Uma Shashikant has the answers.
I am 29 years old and unmarried. I have been working for the past 10 to 12 years.
On the one hand, I have become a miser.
On the other, I have a craze when it comes to shopping for jewellery. During Diwali, I go on shopping spree for gold ornaments.
Around five years ago, I began investing in fixed deposits, post office saving schemes and insurance.
Now, the sudden fear of old age and retirement is causing me to think of other investments.
Please advise.
- Caroline Susaimanickem
Your investments
At your age you should invest for growth, not income.
All your current investment choices are fixed income earnings. If you are concerned about your old age, you need your money to grow big as well. That is why equity (shares and diversified equity funds) is what you must consider.
Work over the next five years to keep your portfolio 60:40 in equity and debt (fixed-return investments).
Keep a savings ratio, so you do not overdo the saving. At your age, you should be happy putting aside a maximum of 30% to 40% of what you earn.
Equity
Start small. Invest in a diversified equity mutual fund. You need not know the stock market, the fund manager will do the investing for you. Don't care about the state of the stock market today.
In 30 years when you need the money, your equity mutual fund investment will be much bigger than any thing else that you have now chosen.
When your fixed deposits and post office saving schemes mature, invest the proceeds in an equity fund.
You can start right now by putting aside small amounts every month to be invested in a diversified equity fund. This is known as a Systematic Investment Plan. To understand SIPs in greater detail, read How to invest in a mutual fund.
On fixed return investments
Choose a Public Provident Fund for your fixed return investment. It has better tax benefits.
Keep bank deposits only for emergencies � an amount equal to six months salary should be fine.
On gold
Gold jewellery is not an investment. You earn no interest, and you are unlikely to sell it unless you are in great financial distress. Indulge yourself, but look at it like buying clothes and accessories. Don't mislead yourself into believing that you are investing when you buy jewellery.
I am 26-years old working on a short stint abroad. I have saved Rs 8,00,000 in saving account and I can save up to Rs 70,000 every month.
I will be returning to India after three years and would like to buy a nice car and an apartment when I do so.
How should I invest my money?
Should I come to India and then look for an apartment or buy it now?
- Rohit Willam
On your investments
You should focus on wisely investing your money and allowing it to grow in a sustained manner.
A savings account is only for liquidity needs.
Invest in diversified equity mutual funds. There is no tax implication for a Non-Resident Indian � both dividends and long-term capital gains are exempt from Income tax. Only if you sell what you have within a year, tax will apply. Read All you need to know about capital gains.
Interest on NRI fixed deposits are also exempt from tax. So you can keep some money there too.
You have the chance of investing in international markets and products. Talk to your bank and begin to understand your choices. You can hold a mix of international funds and Indian investments.
On buying a home now
Do not hurry into buying a flat. I have NRI friends with similar plans who have not returned in years. The result: their flats lie unused and wasted.
When you are young and like to keep options open, it is wise to keep your money in flexible investments. This helps when you change your plans.
It is not easy to sell a house. Nor can you break it into bits to meet any sudden financial need.
You are better off having money when you come to India. Don't worry about the property prices.
Illustration: Dominic Xavier
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