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Financial Planner - Answered on Dec 29, 2023

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Asked by Anonymous - Dec 28, 2023Hindi

I am 22-year-old and am just into my first job. My monthly take home and expenses are Rs 40,000 and Rs 16,000 respectively. I manage to save Rs 25,000 after taking care of miscellaneous expenses. How can I best invest these savings to generate a corpus of Rs 10 crore by the time I turn 55 years. Please help me achieve my financial dream.

Ans: I am glad that at 22 you are already thinking of having a retirement corpus of Rs 10 crore. Starting early, in fact, gives you a first-movers’ advantage as your investments will have more time to compound.
While a period of 33 years, to be honest, is not enough to generate a corpus of Rs 10 crore with just Rs 20,000 savings per month, you'll need to create a solid investment strategy. Here's a potential plan you might consider:
1. Start Early (which you are already doing): Time is your biggest advantage due to the power of compounding. The earlier you start investing, the more time your money has to grow.
2. Investment Vehicles:
a. Equity Mutual Funds: Consider investing a sizeable portion of your savings in equity mutual funds. These tend to offer higher returns over the long term. Choose a mix of large-cap, mid-cap, and small-cap funds for diversification. Instead of investing in mutual funds by yourself, take professional advice from your financial advisor.
b. Public Provident Fund (PPF): PPF is a long-term, tax-saving investment with a lock-in period. It offers a fixed, tax-free interest rate and is a safe option for long-term wealth creation. Most conservative Indians prefer PPF to diversify their portfolio. For the salaried, a part of their basic salary mandatorily goes into the employees’ provident fund, helping them create a financial cushion for their golden years that offers safety as well as return.
c. Stocks: If you have the inclination and knowledge, consider investing in individual stocks. But if equities give higher returns investing in them also entails higher risk. Do not venture into direct equity investing just because your neighbor does it. You need to have sound and solid understanding of how equity markets behave under different economic situations. I would rather suggest focus on investing in mutual funds then in equities.
3. Systematic Investment Plan (SIP): Consider investing a fixed amount every month through SIPs in mutual funds. This strategy helps in rupee-cost averaging and reduces the risk associated with market volatility. It also inculcates financial discipline in an investor.
4. Asset Allocation: Maintain a balanced portfolio by diversifying across different asset classes like equity, debt, precious metals like gold and silver and other investment avenues including real estate. This helps spread risk.
5. Regular Review and Rebalance: Periodically review your investments to ensure they keep pace with your financial goals. Rebalance your portfolio if needed to maintain the desired asset allocation.
6. Financial Discipline: Stick to your investment plan and avoid unnecessary withdrawals or impulse decisions, especially during market ups and downs.
7. Consult a Financial Advisor: Consider seeking guidance from a certified financial planner or advisor who can help tailor a plan suited to your goals, age profile, family dynamics and risk appetite.
Remember, while aiming for a significant corpus, it's also essential to maintain an emergency fund for unexpected expenses and have adequate insurance coverage to protect yourself and your dependents.
Lastly, the goal of accumulating Rs 10 crore by 55 is ambitious.
Please reassess this target periodically based on increase in your income, expenses, and economic conditions to ensure it remains achievable and realistic.

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