The Telegraph
Since 1st March, 1999
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As you sow, so you reap

It was the best of times; it was the worst of times. It was 1775 that Charles Dickens was describing in his 1859 novel A Tale of Two Cities. More than two centuries later, time seems to be pretty much the same for an average Indian investor

If you have money in your pocket and fire in your belly then time could not have been better. Investment options for the young are swelling by the day and you can sit back and cherry-pick from different instruments on offer.

But itís the worst of times as well. With interest rates plumbing new depths, those who have seen the Mother Earth for long years and prefer to walk the safe route are feeling the heat.

So what should be the right age-investment mix' The Telegraph spoke to three investment advisers whose suggestions should throw some light on what assets to invest in at what age so that money grows to meet our future needs.

Amit and Tina got married a couple of years ago. Amit is a mid-level executive in a software firm, and Tina works for a bank.

Being young, Amit and Tina should not be averse to risk, assumes Deepak Salvi of Tata TD Waterhouse Securities, who suggests they should be investing in assets with high growth potentials.

Salvi says Amit and Tina should park 40 per cent of their surplus cash in mutual fund schemes that invest in shares. To balance the volatility risks, 15 per cent of their savings should go into debt schemes that offer steady returns.

Besides financial assets, Salvi wants Amit and Tina to buy an apartment with a home loan and spend up to 15 per cent of their disposable surplus to repay it.

The remaining 30 per cent should be used to insure themselves.

Sameer Desai, a wealth adviser at JM Morgan Stanley, assumes Amit and Tina have already provided for adequate insurance cover and invested in tax-saving securities. He wants 70 per cent of their surplus to be invested in equity and 30 per cent in fixed-income securities.

Of their total investment in shares, 80 per cent could be routed through an actively managed diversified fund, and the balance in a sector fund.

The debt component in Amit and Tinaís portfolio could be invested in RBI Relief Bonds.

Dhirendra Kumar of Value Research Online ó a specialist in mutual funds ó recommends a more conservative approach. He suggests 70 per cent of their surplus should be invested in debt funds and the rest in equity schemes.

Amitís boss Nikhil, who is in his mid-forties, has so far not put much thought into investments. Whatever he could save was used mostly to save taxes.

Nikhilís wife Sandhya, who is a school teacher, is quite handsomely paid.

But now with their daughter growing and expenses on her education shooting up. Nikhil and Sandhya are wondering whether their money is sleeping.

Salvi says Nikhil and Sandhya should invest 20 per cent of their savings in shares through mutual funds, 10 per cent in a balanced fund and 35 per cent in debt funds. So much for future expenses on their daughterís education. For themselves, Nikhil and Sandhya should use 10 per cent of their savings to buy a pension plan or a unit-linked insurance plan that invests its corpus in both debt and equity.

Salvi recommends real estate for Nikhil and Sandhya as well. They could spend up to 20 per cent of their savings on repaying the loan, he says.

To secure the family against a financial setback in the event of Nikhilís death ó the principal earner in the family ó they should also have a term cover till the loan is fully repaid.

Desai says Nikhil and Sandhya should invest 60 and 40 per cent of their savings in debt and equity plans respectively, after providing for adequate insurance cover.

Kumar, however, suggests they could invest up to 60 per cent of their surplus in equity and 40 per cent in debt.

Amitís neighbour, Dinesh Gupta is retiring next month. What does he do with the huge sum that he is going to receive as retirement benefit'

Salvi says Guptaji should invest 50 per cent of this amount in monthly income plans of mutual funds. These plans pay monthly dividend that would take care of Guptajiís routine expenses.

Of the remaining 50 per cent, half should be parked in Varistha Bima Yojona and the other half, in monthly income scheme of post offices or RBI Relief Bonds.

Desai says Guptaji should provide for medical insurance and invest 90 per cent of the rest in debt schemes of mutual funds. The balance 10 per cent could be invested in an equity fund.

Kumar suggests, Guptaji should invest as much as possible in Varistha Bima Yojona, and invest the rest in monthly income schemes of post offices or mutual funds.

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