I am 55 and have Rs 50 lakh as lump sum that I got from an earlier investment. With bank savings rates falling and markets volatile, what is the safest way to invest these funds so that I can build some wealth in five years.
Rushabh Desai Founder, Rupee With Rushabh Investment Services:
If you are looking for safety, investing in debt mutual funds and fixed deposits makes sense. However, in order to create wealth and generate inflation-beating returns, you need to get take some risk by investing in equity products. Keeping your age and medium-time horizon of five years in mind, if you agree to take some risk, consider investing in equity savings funds (hybrid funds) with 25-30 % exposure in pure equity. These funds will help you achieve inflation-beating returns with comparatively lower volatility and better consistency. Since equity savings funds are considered equity for taxation purposes, these will be tax-efficient as well. The current market volatility will help you generate better risk-adjusted returns, but an important thing to keep in mind is that chasing returns while ignoring risk is not the right strategy. If you are not able to stomach any kind of volatility, sticking with fixed-income products would be best.
My wife and I are both 40 and earn a combined income of Rs 25 lakh annually, with yearly expenses of around Rs 10 lakh. We have two children, aged 10 and 7, and we want to plan for their higher education and weddings, while also building our retirement fund. We have saved Rs 50 lakh so far. How should we allocate this across equity, debt, and other assets to meet these goals without overexposing ourselves to risk?
Adhil Shetty CEO, BankBazaar: Given your goals and savings, a balanced approach works best. You can split your Rs 50 lakh corpus into three parts:
Rs 30 lakh (60%) in equity mutual funds, typically flexi-cap or index funds, for long-term goals like retirement (20+ years) and children’s higher education (8-10 years);
Rs 15 lakh (30%) in debt instruments, such as PPF, short-duration debt funds or FDs, to cushion volatility and address nearer goals or partial education needs;
The remaining Rs 5 lakh (10%) should be retained as emergency funds by investing in high-interest savings or overnight funds.
Your annual surplus of Rs 15 lakh can be split in the same ratio—60% in equities, 30% in debt, and 10% in liquid assets. As your children near 16, shift their education funds gradually to debt. Begin separate SIPs early for each goal, for each child, and aim to increase these annually. This simplified plan will help you grow your wealth without excessive risk and can be easily adjusted to accommodate evolving priorities. It is recommended that you consult a financial planner for a more customised plan that takes into account your specific risk appetite, liquidity, and other requirements.
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