24M - Seeking Investment Advice for My Early Career Journey

[harsh59]

I'm a 24M who recently landed my first job, earning ₹1.25 lakhs in hand post-tax monthly. I want to start my investment journey and would love some advice from this community. Here's a breakdown of my current monthly expenses:

- Rent: ₹15k
- Food: ₹4k
- Travel: ₹2k
- Student loan: ₹22k
- Electricity: ₹3k
- Miscellaneous: ₹4-5k (working to reduce this)

After these expenses, I'm left with approximately ₹70-72k for savings and investments. My goal is to build a decent corpus for various life targets like getting a car, taking foreign trips, buying a home, etc.

While my primary aim is to increase my salary through hard and smart work, I recognize the importance of investing. I have a medium level of knowledge about investments (thanks to my MBA and current job at a bank), so feel free to dive into more complex suggestions.

Here's my current portfolio:

- Stocks: ₹25k invested → ₹32k current value (₹7k returns since Jan '24)

- Mutual Funds: ₹21.5k invested → ₹26k current value (since Jan '24)

#Current MFs:
1. Aditya Birla PSU Equity Direct Growth
2. Quant Infra Fund Direct Growth
3. Quant Small Cap Direct Growth
4. Nippon Small Cap Direct Growth (SIP)
5. Bandhan Nifty Smallcap Index 250
6. Groww Nifty Non-Cyclical Consumer Index Fund

I know I might have diversified these MFs too much in the heat of the moment and now want to streamline them.

#My Questions:
1. Investment Strategy: What should my investment strategy look like given my current financial situation and goals?

2. Mutual Funds: Should I consolidate or switch any of my current MFs?

3. Portfolio Balance: How should I balance between stocks, MFs, and other potential investments?

4. Additional Investments: Are there other investment avenues I should consider (e.g., PPF, NPS, real estate, etc.)?

5. Risk Management: How can I effectively manage risk while being aggressive in my early career?

Any insights or recommendations would be highly appreciated! Thanks in advance!

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TL;DR: I'm 24, recently started my first job earning ₹1.25 lakhs monthly, and have around ₹70-72k left after expenses. Seeking advice on streamlining my current investment portfolio and developing an effective investment strategy for long-term goals.

 

[soum_bhowmik]

Hi @harsh59 -

Below are my suggestions for your financial planning. Please conduct your own research before making any investments.

Priority 1: Build Your Emergency Fund

• Aim to save enough to cover 6 months to 2 years of expenses.
• Keep these funds in a Fixed Deposit (FD), liquid fund, ultra-short duration fund, or short-duration funds.
• Use this emergency fund only for job loss or other emergencies. Do not use it for any other purposes.

Priority 2: Health Insurance

• Obtain a family floater health insurance policy in addition to your corporate health insurance.

Priority 3: Life Insurance

• Get a life insurance policy for adequate life cover. Avoid ULIPs or traditional life insurance policies.
• Purchase a pure term insurance policy online to avoid agent commissions.
• Remember: never mix your investments with your insurance.

Priority 4: Investment Goals

• Identify your investment goals and determine your target corpus.
• For goals with a 3 to 5-year horizon, use bank FDs or debt funds.
• For goals with a horizon of more than 5 years, invest in equity or hybrid funds.
• You don't need many small-cap funds. One small-cap fund aligned with your goals is sufficient.
• Typically, 4 to 5 mutual fund schemes are adequate for most investors.
• Match your investment scheme selection with your investment goals, target corpus, time horizon, and risk tolerance.

Please let me know if you need any further assistance. I'll be happy to help you out.

 

[soum_bhowmik]

Hi @harsh59

Additional Investment Options:

• Public Provident Fund (PPF): Consider investing in PPF as it falls under the EEE (Exempt-Exempt-Exempt) category, offering tax benefits at all stages—investment, interest accumulation, and withdrawal.
• National Pension System (NPS): Invest in NPS only if you are receiving tax benefits and if your employer is contributing to the NPS under the new tax regime. Otherwise, avoid investing in NPS.

Please let me know if you need any further assistance. I'll be happy to help you out.

 

[harsh59]

Both of these have a long lock in period. I am not inclined right now to park my money in such long term investments

 

[BHAVESHKESWANI]

First you need to be Insured yourself and family.

Secondly never ever do unnecessary expenses, because IF YOU RESPECT MONEY, IT WILL RESPECT YOU BACK.

On Third thing, expend only an amount which may not disturb your home budget later on.

In last, Invest in NPS as your age is not more now. Once you reach at the age of 60, you will have handsome corpus and after annuity process, you can also avail monthly pension.

 

[17ysaurabh]

Hi @harsh59
I suggest you to consider the following changes for your investment portfolio:

• Invest around 30% of your investment amount (30% of 72k = Rs. 21k) in debt. You may choose debt investment options like PPF, NSC, debt funds, etc.
• Since you want to invest aggressively in equity, I suggest investing around:
  • 50%-60% in Large cap / Index funds.
  • 15%-25% in Midcap funds.
  • 15%-25% in Small cap funds.
• Currently, your mutual funds' portfolio has the major share in the small-cap funds which is highly risky. I suggest reducing that.

Note: I'm assuming you are already taking 80C & HRA exemption benefits. If you want to save additional taxes, you can invest in NPS.

 

[_rohitsoni]

Hey @harsh59,
Glad that you are on right track. Your expenses are pretty low considering your income. Before diving into all the investment/insurance stuff, I want to suggest you to take a part of it to enjoy life as well (around 10k which is less than 10% of your in-hand is good to start). Use this on experiences, thing you wanna get or anything which gives you pleasure.

Diving into investment part of it. - Considering 60k as investible corpus per month
First of all, buy health insurance of atleast 5L for you and your family members - this will cost you around 15k each member.

Second, buy term insurance for yourself, atleast of 15 times of your annual income - around 1.5Cr-2Cr. - This will cost you another 15k.

Third, Build an emergency fund of 3 months - almost all your mentioned expenses are essential so we will consider 50k as your monthly expense - So total of 1.5 lakhs

Fourth, start investing.
Looking at your current MF portfolio, it feels like you got tempted with the recent small-cap rally. I know you have an MBA and works in a bank but I'm not really sure if you have enough experience of market movements, so would not suggest you to dive into the world of smallcaps. Additionally, Sector specific funds should be touched only when you have good in-depth knowledge of that sector (if you do, that's great).

Action items:
1. Select one out of three Smallcap Funds if you really want to invest in it.
2. Sell Groww's MF and AB PSU Fund - Groww is pretty new in market and PSU one is sector specific if you don't have enough knowledge about that sector it can harm you.
3. Add one index fund and one ELSS.

Investment Strategy:
-> Dont invest in market for foreign trips, you will not be able to enjoy much after redeeming years of your investment for one trip - you have good income, just keep a part of it in bank account or short term FD and you are good to go.
-> Define timeline for getting a car and if time to purchase is more than 3 years, then only invest in market, else hybrid or FDs are good.
-> Same goes with home

Portfolio Balance:
Use mutual funds for your goals, so all investments in MF should be linked with specific goals. Use stocks as a way to build wealth and keep it for long term. Don't go to other investments till you have a considerable exposure in markets.

Additional Investments:
No, your company must be deducting EPF before giving you the salary, check that and consider it to be your debt investments. No more is needed. PPF is good if you have very high income and want to save as much tax as possible. NPS is good for those who don't have investment discipline. Real Estate is a big ticket purchase and RIETs don't fetch much returns. Crypto can be introduced at a later stage when you have around 10L in markets. Gold can be purchases in the form of SGB or biscuits in very small quantities.

Risk Management:
Getting a total of 3 funds - Index, ELSS and Smallcap is good mix.