Every month I, 40, am left with a surplus of Rs 25, 000. I want to invest this for my daughter's higher education (10 years away). Which instrument will give the best returns? Should I consider unit-linked children's plans? Or, are mutual funds (MFs) preferable? I have investments only in bank deposits.
Since your financial goal is a decade away, equity would be an ideal asset class. Considering the monthly surplus amount, the MF route would be the perfect investment vehicle. You may want to consider starting a systematic investment plan in two different MF schemes. One in a Nifty-based index fund, and the second one in a scheme that invests in small- and mid-cap companies. Invest Rs 15,000 in the former and Rs 10,000 in the latter.
Remember to transfer the corpus into debt mutual fund about two to three years prior to its actual requirement.
I retired six months back and received Rs 26 lakh (EPF plus gratuity). How should I invest this? I don't have any dependants. I am teaching for three months now, earning Rs 5000 a month and this takes care of our monthly expenses. My only equity investment has been in Tata Motors' stocks, bought 20 years ago. Should I continue holding these, as financial planning does not advise retirees to invest in stocks? But, I don't need this amount.
Please keep in mind the following: One, buy maximum possible health cover. If you are unable to do so, set aside a corpus of Rs 5 lakh for health-related expenses. This should be parked in a bank fixed deposit. Two, from the corpus, set aside a sum equal to six months' expenses in a savings bank account linked to fixed deposit. This should be utilised in times of emergency only. Three, focus on investment that can generate a monthly income. But, as you may not need that, you can divide your residual corpus in 60:20:20 ratio. Put 60 per cent in bank deposit and 20 per cent in equity. This could either be direct equity or equity mutual fund. The left over should be deployed in gold.
The writer is a certified financial planner. The views expressed are his own. Send your queries to yourmoney@bsmail.in