Where should I invest money?

When it comes to investment in the Indian economy, everyone has a different perspective. While old people like to take extremely conservative approach...

When it comes to investment in the Indian economy, everyone has a different perspective. While old people like to take extremely conservative approach and do not want to risk anything, young blood is extremely aggressive and just want to double the investment in no time without worrying about losing everything.

A 51-year-old person: “I can’t take any risk. I don’t understand anything about the stock market and mutual funds. Hence, I want to keep my money in the savings account and FD.” ,

A 25-year-old person: “I want to double my investment in 6 months and I can take the risk. If required, I can even borrow it from my relatives and friends. Hence, I want to invest in the derivative market (futures and options).”

Now, these are two extremes of investment.

On one side, we have extremely conservative investors who are not willing to take any risk and on the other side, we have extremely aggressive investors who are willing to risk everything.

But which approach is correct?


It is neither good to have a conservative approach nor an aggressive approach. The answer lies somewhere in between.

Why extremely conservative approach is not good?

  • If a person keeps the money in the savings account, the interest is around 3.5% whereas the average inflation rate in India is around 4.5%.
  • It means the money is not growing but actually shrinking. Rs 100 kept in saving account will become Rs 103.5 in one year but the real value of Rs 103.5 would be Rs 99. In the long run, the real value will reduce even further.
  • In the case of FD, the rate is between 6%–7% which is just 1.5%–2.5% above inflation.

Why extremely aggressive approach is not good?

  • Intraday stock trading and investment in the derivative market is more like gambling where most of the retail investors lose the money. It is not everyone’s cup of tea.
  • A lot of people gets too greedy and invest money without any knowledge. The end result is a LOSS.

This is where mutual funds can help in balancing the risk vs return.

However, it is very crucial to build the right portfolio of mutual funds which can cater to the financial goals of an individual.

However, before we build a portfolio, we need to ask a few questions:

  • What is my financial goal? Do I want to build a retirement corpus or do I want to generate a fixed source of income from my investment? Do I want to buy a car or a house?
  • When will I need the money? Do I need it in the next 3 years or do I need it in the next 10 years?
  • What are the available options to fulfil my financial goals?

This will vary from person to person hence we can’t generalize a specific mutual fund. However, let’s try to consider a few personas to understand the approach to building a mutual fund portfolio.

Persona 1: A 25-year-old working professional in a private company

Ankit is a 25-year-old software engineer. There is no liability on Ankit. With the ever-increasing work pressure in the corporate world and increasing health problems due to pollution and bad food habits, he doesn’t think he can work till 60. Hence, he wants to retire at the age of 50 and wants to build a retirement corpus for the same.

Approach: Ankit is young and his investment horizon is 25 years. Ankit should start a SIP in equity mutual fund. He should have 50% allocation in large-cap funds and 25% in mid-cap and 25% in small cap. He can also opt for a multi-cap mutual fund which will include a large, mid and small cap in the right proportion. Ankit should ensure an emergency budget of 6 months expenses in the liquid fund to take care of any unexpected expenses.

Persona 2: A recently married couple

Venkat is a 31-year-old working professional. He married last year and his wife is also working. The couple wants to buy a car within a year.

Approach: Since Venkat and his wife have only 1 year to buy a car, they can’t afford any risk. Hence they should not invest in equity mutual fund. Rather, they should invest in the liquid mutual fund. It is the lowest risk mutual fund with returns in the range of 7%-8% and a better alternative to FD.

Persona 3: A 40-year-old working professional

Jai is a 40-year-old working professional. He recently sold his flat and received a lump sum. He wants to invest this lump sum amount to get a good corpus in the next 10 years.

Approach: Jai should invest the lump sum amount in the liquid mutual fund. He should set up an STP (Systematic Transfer Plan) into equity mutual fund to transfer 70% of the amount from the liquid fund into equity mutual fund in the next 3 years. 30% should be kept in a liquid fund for balancing the portfolio. The equity mutual funds should have exposure to large-cap and mid-cap stocks in the right proportion. A multi-cap mutual fund is also a good option. The major portion should be kept in large-cap funds.

Persona 4: A 60-year-old retired lady

Sushila is a 60-year-old retired government employee. She had received a corpus on retirement. She wants to invest in such a way that she can get a monthly income from her investment.

Approach: She can divide the lump sum in FD and liquid fund. Then she can set up a Systematic Withdrawal Plan (SWP) which will automatically transfer a specific amount from the liquid fund into her saving account every month. She should also set up a Systematic Transfer Plan (STP) where a portion of the liquid fund will be transferred to equity mutual fund which can generate a higher return. In terms of percentage allocation, 70% should be in liquid and FD and 30% should be in equity funds with systematic transfer option. Out of 30% equity allocation, more than 50% should be in large-cap mutual funds and rest should be divided into the mid and small cap.


  • Direct investment in stocks is very risky and should only be done with the right knowledge. In case you want to invest in stocks, always opt for quality bluechip stocks and invest for the long term period. Never go for intraday stock trading or futures and options.
  • Always opt for a term plan and medical insurance. Do not mix insurance and investment.
  • Do not depend upon the stock tips of the market experts.
  • Please consult an expert to build your mutual fund portfolio. Always opt for direct mutual fund option as regular mutual fund include agent commission.
  • Investments will grow slowly. It will require patience and discipline. Give your investment a few years for the power of compounding to work its magic. And always remember- “Slow and steady wins the race.”

Before investing, make sure you take your own decisions, no one else will be responsible for any losses or gain you make.


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