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Have a surplus income of 10,000 per month. Should I go for MF or stick with FD?

By on December 15, 2021 0


I am 25 years old and have excess income of ??10,000 per month to make investments. I have been investing mainly in bank FDs since I started working. I am also ready to increase my investments as I have higher income. Should I start investing in mutual funds or stick with term deposits? Please suggest.

-Name hidden on request

Given your young age, I will suggest that you invest in equity funds to achieve financial goals that expire after 5 years. Equities as an asset class far outpace fixed income instruments like term deposits and long-term debt funds. However, since stocks can be very volatile in the short term, invest in short term debt funds or term deposits to park your emergency fund and to invest for short term financial goals, depending on your appetite for money. risk. While term deposits offer higher certainty of income and greater capital protection, debt funds generally generate higher returns due to their exposure to fixed income market linked instruments.

You can consider the direct plans of these short term debt funds — ICICI Short Term Prudential Fund and HDFC Short Term Debt Fund — through SIPs to achieve your short term financial goals. For your long term investments, you can consider direct plans of these large cap and flexicap index funds / “large and mid cap” funds — Tata Index Sensex Fund or HDFC Index Sensex Fund; and Mirae Asset Emerging Bluechip Fund or Parag Parikh Flexi Cap Fund — via SIPs. Investing through the SIP mode will ensure financial discipline and also lead to an average cost in rupees during market corrections.

Plus, make sure you have term insurance that equals at least 15-20 times your annual income and top it up as you see income increases. To increase your monthly SIP contributions in the future, you can either start new SIPs in the same funds or use the SIP reload feature, if available, of the respective fund companies to automatically increase your SIP amount at predetermined periodic intervals. .

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