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OLM Desk - 31 March 2021

Distribute Your Assets For Best Returns

Rittika Pal, Kolkata

I am nearing retirement with three years of active service still left. I have mainly been in FDs all my life, and for the past seven years, I have invested in blue chip stocks. Currently, 15 per cent of my assets are invested in stocks, which I have acquired directly. Some of my friends are advising me to go for MFs, and I wish to buy in bulk through one-time allocations as I feel SIPs will take a long time to bear results. How should I approach the market?

I appreciate that you have been investing in your freedom fund. It is wise to do an asset allocation as per the risk appetite. FDs will give a sense of security, but adding debt mutual funds in your portfolio of retirement can be tax efficient, looking at the current FD rates. Exposure to direct equity will add up value to your freedom fund.

You can invest in mutual funds via lumpsum and SIP for channelling your monthly savings and use a Systematic Transfer Plan for your lumpsum investment in equity mutual funds.

Hina Shah, Certified Financial PlannerCM & Financial Coach, LUHEM

Sakshi Gupta, Kolkata

I am an edutech consultant aged 44, and have, for the past 18 years, invested in equity funds via SIPs. However, I have realised that my asset mix is one-sided. Please guide me if there is any scope for improvement and consider the relatively low returns generated by several categories of debt funds.

Your strategy is good enough to achieve your long term financial goals. Ideally debt fund returns should be compared with similar category asset classes like FDs.  Even though we get lower returns from debt funds, they are comparatively tax efficient.

You would get indexation benefit if you hold your debt investments for atleast 3 years. You should consider adding debt funds to your portfolio to meet your short term goals. If your goal is less than 7 years away, you should start adding debt funds (with less than 3 years of average maturity categories) and book profits from equity and switch it to debt.

It is always better to have a diversified portfolio.

Uma & Suhel Chander, Certified Financial PlannerCM, Handholding Financials

Shreya Pandit, Mumbai

I am 25 and have recently started investing in equity. I earn about Rs 18,000 per month and have no real liabilities or financial burden. I do not need to give any portion of my earnings to my family. Nevertheless, I want to have approximately Rs 10 crore worth of assets in about 20 years, when I will be 45. Do you recommend only equity for my portfolio? Or should I go in for commodities and real estate as well, in which I have no experience?

Setting a goal in life is the first step towards financial planning. Once you have an aim, start implementing it. The sooner one starts investing; the better is the compounding effect of the money invested. Hope you are investing instead of trading or speculating. Investing in equity for the long term can give a good return, provided you have invested with help of expert advice in good companies.

Similarly investing in commodities also requires a thorough knowledge about them. One can invest in commodities through direct buying or through ETF or via buying equities of the commodities.

Commodities can help diversify a long-term investment portfolio and may increase your returns if you recognise the difference between speculation and investments and understand the rewards and risks. Higher returns come with higher risk. It is wise to divide eggs into different baskets. Real estate can be an asset class to diversify the risk in the portfolio. Every asset class has its own pros and cons. There are various ways one can invest in real estate.

You can also consider investing in all the above asset classes through investing in mutual funds. Read and study about all the asset classes before investing or discuss it with your financial planner for further clarification and planning.

Hina Shah, Certified Financial PlannerCM & Financial Coach, LUHEM

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