India’s population is 1.4 billion people, with a median age of 28 years. This young population is a key factor in the nation’s vibrancy and vitality. Life expectancy in India ranges from 70-74 years, on average. A little over 36% of India’s population resides in urban areas.
India’s investment landscape is diverse, catering to different financial goals, risk appetites, and time horizons. They range from tax-saving schemes (PPF, NPS, ELSS, ULIPs, Tax Saving Deposits), longer horizon and higher returns products (mutual funds, stock investments, IPOs), shorter horizons (fixed deposits, liquid mutual funds, ultra-short-term debt plans), medium-term goals (ELSS, FDRs, Recurring Deposits), and longer-term goals (Equity Mutual Funds, direct equity, gold, real estate, NSCs, Bonds).
On April 9th, 2024, BSE Sensex touched the 75,000 level. Established in 1979 at a value of 100, it has since grown to 15 at a rate of 85% over these 45 years. India has the fifth-largest economy in the world, and there is a great chance that its 15% growth rate will continue, let’s say, for the next 45 years as well!
With that history, let’s bring the conversation to those who are right at the beginning of their careers.
A 21-year-old woman who has joined a lender and has a good income is living with her family in one of the major cities. She is single, with no dependents in her household. She is delighted with both the idea and the fact of having earned income when she first starts working.
Her parents and other sources of funding for her financial needs, including school and college costs, were provided by her parents, and she has already received regular pocket money from them. She’s from an upper-middle-class family (but not lavishly rich), doing well in academics and professionally.
She balances her job, family, and social life properly. No falling in variations of either. Her goal is to do the work well and leave a positive impression.
She intends to save money each month in a certain percentage to costs and deposit it in a bank savings account at a specific interest rate so that the money can increase in value through compounding right away. Later, by disciplined regular savings, she creates a little corpus of valuable funds. She parks the first tranche of investable surplus in bank fixed deposits, earning a rate of interest higher than a savings bank account as she explores the financial investment world for the first time (beyond academics). Together, she invests in a tax savings plan so that taxable earnings at the end of the time get reduced. In the following weeks, she invests a percentage of profit funds in tax-free bonds, at a rate higher than both fixed and savings accounts, and that the interest earned on them is tax-free. Her risk appetite and habits are suited to the investment sequence outlined below.
Given her single status and no foreseeable or immediate liabilities, she is sufficiently covered by her employer on insurance coverage. Therefore, she defers plans to buy another plan, at least for 12 weeks.
After a year or so, she decides to take a 20-year home loan with an EMI that works for her monthly spending needs after reviewing her economic and investment decisions.
So at the age of 22-23 years, she has a savings bank account balance (short-term liquidity), fixed deposits (short to medium-term liquidity), bonds (medium to long-term investment), an insurance, and a property through a home loan.
She opens a deposit account and parks her bonds online in it, and with each day getting more and more interested in the capital markets. She keeps abreast of market trends to learn about how opportunities and businesses are faring.
It is now necessary to expand asset allocation in growth-oriented products that can produce marginally higher returns, such as electronic strong equity and mutual funds in equity. These products do not have a main security guarantee (as opposed to the products in the portfolio).
While the industry was correcting, she presently invests in capital mutual funds. Through a regular, comprehensive investment plan, progressive investments are being made. She has come to understand and be comfortable with mutual funds in the collection over the coming weeks.
The second stage is to walk in clear equity investments. Her purchase strategy remains awareness, information, and research-based.
So she has created a wonderfully diversified investment portfolio in her first five centuries of entering the real world.
She now regularly reviews her profile and places tactical asset planning at the heart of her purchase philosophy. She is not swayed by the pleasure of business rising from time to time, nor does she get jostled by marketplace corrections.
She chooses coverage as part of her ongoing total financial planning.
With a goal of certain investment results, her profile is also diversified between debt and equity, short to long term, wet and development-oriented, deductible and tax-free money, etc.