Always Invest After Evaluating Your Financial Goals

Ashmita Singh, Noida

I am 22 years old and have just started working. I want to invest in equity mutual funds. How do I choose one? What parameters should I consider?

Many default to equity mutual funds as a first-time investment. I would advise you to first evaluate your savings objective and financial goals, and based on your goals, choose the right instruments. For short-term goals, debt mutual funds would be a better option than equity mutual funds because they are less risky. But if you have a higher risk tolerance and a longer time horizon, equity mutual funds would be good.

That said, a little exposure to different asset classes will diversify your portfolio and improve the risk-return profile.

For mutual funds, always check their ratings from multiple sources. Filter out the ones that have been consistently ranked high over long periods of time. Then check if the objective of the fund matches with your risk-return profile.

Always remember that selecting the right fund is very important and depends on your risk appetite, investment horizon, financial goals, and return expectations. If at any time you find it difficult or confusing, don’t hesitate to take the help of a financial advisor to help you make the right investment decision.

Rishad Manekia, Founder and MD, Kairos Capital

Amit Roy, Mumbai

I am 24 years old and have recently started working. I have two life policies; one self bought and one employer-provided. I want to buy a standalone accident policy as I take part in adventure sports. How should I go about it?

Standalone accident insurance policies are typically offered by general and health insurers rather than life insurers. Generally, accidents due to adventure sports are excluded in these covers. However, there are a few insurers that cover adventure-related sports in the base policy or with a small additional premium.

Sometimes the insurer will also ask for the nature of the adventure sports. It’s best that you buy this product with the help of an informed advisor who can give you options and also share with you the policy wordings that allow adventure-sports coverage. Do make sure that you fill the proposal form yourself and clearly declare the sports you will undertake.

Kapil Mehta, Co-Founder, SecureNow

N. Krishnaswamy, Bengaluru

I am 28 years old and have recently started my entrepreneurial journey. I want to create an emergency corpus as my monthly inflows are not regular. How should I proceed?

An emergency fund will protect you from sudden loss of income. To start with, try and start saving whatever small amount you can regularly, every month. That will help you create a sizeable corpus over time.

The ideal way is to decide the amount in the emergency fund. As a rule of thumb, it should cover 6-12 months of your basic expenses, which you can increase if you have dependants or liabilities. You can also save and invest through systematic investment plans (SIPs) as that will prevent you from getting tempted to spend money that would otherwise be easily accessible in the bank account.

Always remember that the purpose of the emergency fund is protection and not returns as such. It would be better to look for capital preservation through lower-risk investment options rather than higher-risk investments.

Rishad Manekia, Founder and MD, Kairos Capital