Do you know how much to invest at your age? Here are some investment options

Anurag, a 42-year-old civil engineer from Kerala's Kozhikode, has been living in Abu Dhabi with his family for over a decade, earning more than two lakh rupees per month. Despite this, his only investment so far has been a flat in Ernakulam. 

With thoughts of returning to India in five or six years, Anurag has recently become interested in securing his financial future.

However, like many others, he realized that he had spent years without a clear financial plan, which has left him unsure of how long he’ll need to work to achieve his retirement goals. Anurag’s situation is not unique; many expatriates and even those living in India fail to save and invest in proportion to their earnings. 

For people like Anurag, there are two key recommendations:

⦁ Postpone the decision to settle down in India
⦁ Minimise spending and maximize investments

Investment Strategy by Age Group

For those under 30: It's advisable to allocate 90% of your investments to equity-based schemes. If you are hesitant to invest directly in stocks, mutual funds are a good alternative. Investing through SIPs (Systematic Investment Plans) can yield returns of 12-15% over the long term. At least 10% of your investments should be in fixed-income schemes, such as bank FDs, recurring deposits, or debt mutual funds.

For those over 30: A balanced approach is recommended, with 60% of investments in equity mutual funds, 25% in debt funds, and 15% in bank FDs.

For those over 40 with a single income: Invest 60% in equity-based schemes, 20% in suitable debt schemes, and 20% in bank FDs.

Expected Returns

⦁ Bank Fixed Deposit: 5-8%

⦁ Debt Mutual Fund: 7-10%

⦁ Equity Mutual Fund: 12-20%

⦁ Stocks: 15-25%

Key Considerations Before Investing

⦁ Beating Inflation: Ensure that your chosen schemes offer returns that outpace inflation.

⦁ Avoid Mixed Plans: Steer clear of plans that combine insurance and investment, as they typically offer neither sufficient coverage nor optimal returns. ULIPs, moneyback, and endowment policies should be avoided. Opt for a term policy for insurance coverage instead.

⦁ Informed Decisions: Ignore unsolicited tips and non-expert advice from social media. Focus on investing in companies with a clear understanding of their performance, growth potential, and debt levels.

⦁ Diversify Smartly: Limit your portfolio to 10-20 stocks and adopt a systematic approach by investing a fixed amount every month.

By following these guidelines, Anurag and others in similar situations—can start building a secure financial future, ensuring that their investments align with their life goals and timelines.