I am 65 and have been living alone since my wife passed away about a year ago. Our two children work in Dubai and live with their families. I am not tech-savvy, but I have been considering leveraging digital tools and platforms for retirement planning and banking needs, which my children are encouraging me to do for convenience. They also recently gifted me a smartphone to do these tasks. Given the options to buy mutual funds and other products online, such as G-Secs, what are the things to consider?

Ans: Given that an increasing number of services are now shifting to a digital platform, it’s a good idea to have some initiation into the digital world. Two investment products which can be bought seamlessly through online platforms are stocks and mutual funds. Given that buying stocks directly without proper research can be risky, you can purchase mutual funds through digital services. You can invest as low as Rs 1,000 into mutual funds. Initially, you can set aside an amount, say Rs 5,000, to explore buying mutual funds online. You can track their performance and get comfortable with the online experience. Subsequently, you can try other financial products like G-Secs, for which the Reserve Bank of India (RBI) runs an online platform for retail investors. While going digital is convenient, it also comes with its risks. It is highly recommended that you open a new bank account and link that account to your digital services. The account balance in this new account should be low to minimise any loss due to online fraud. It is also important to use secure passwords and never share passwords/OTPs with anyone. By exercising diligence, we can ensure that we reap the benefits of digital services safely.

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I am 28, unmarried and work as a software engineer in Bangalore. I earn Rs 50k per month. I spend Rs 14k on house rent and Rs 10-15k on food monthly. I also invest around Rs 2k monthly in mutual funds via SIPs. Meanwhile, I am planning to switch my job for better pay. I also want to buy a house in 5-7 years. How should I prepare my next 10 years of investment to meet goals like marriage, home, and family? 

Ans: It is good to note that you have started your SIP journey. Going forward, it is important that you target to increase this SIP amount periodically. Because you have different financial goals – like buying a house, marriage, and family (which presumably means education corpus for future kids), which will come at different points in time, it is important to tackle each financial goal separately. For financial goals which are over 10 years away, you can use a 100 per cent equity strategy by investing in equity mutual funds. For 5-10 years away goals, you can use a balanced strategy by mixing debt and equity. For risk-conservative investors, you can use a 50 per cent equity/50 per cent debt portfolio; for aggressive investors, you can use a mix of 75 per cent equity/25 per cent debt. For goals in the short term, which are due in the next 5 years, it is recommended to follow a 100 per cent debt strategy or introduce a maximum of 20 per cent equity. For building a corpus for buying a house, which is due in the next 5 years, you can use a mix of debt mutual funds and equity mutual funds. Within debt mutual funds, it is recommended not to take credit risk or interest rate risks and stick to low-duration funds like ultra-short-term funds.

Also Read: How Is Senior Citizen Savings Scheme Different From A Senior Savings Account?

I am a 42-year-old widow with two college-going daughters. I work in a public sector company and earn around Rs 90k monthly. I have saved around Rs 45 lakh through mutual funds, property sales, and sovereign gold bonds (SGBs) for their weddings, some of which are parked in my savings bank account now. However, I need at least Rs 15 lakh more for their weddings and house repair in the next few years. Please guide me on which investment vehicle I should choose to achieve that target and help set up a retirement fund. 

Ans: Given that you need to accumulate Rs 15 lakh more in the next couple of years, your investment horizon is short. This severely restricts your ability to take equity risk and generate a higher return. Given that equity markets can be volatile, it will not be prudent to use your current accumulation of Rs 45 lakh and invest it in equity products in the hope of quickly earning Rs 10-15 lakh in the next couple of years. It is very much possible that equity markets can enter a bear phase and let alone earning returns, even the safety of the principal investment can be at danger in the short term. It is best to park the Rs 45 lakh in a high yielding fixed deposit as you may need it for your daughter’s marriage in the short term. In three years’ time, at a return of say 7 per cent, the Rs 45 lakh corpus will grow to Rs 55 lakh. Having secured a corpus totalling to Rs 55 lakh, you can now take some risk to close the gap of additional Rs 5 lakh requirement. If you can start a SIP of Rs 15,000 in equity, over the next 3 years, at a projected return of 10 per cent per annum, you can potentially accumulate a sum of about Rs 6 lakh.

The author is a CFA, a Sebi-registered investment adviser (RIA), and co-founder of www.samasthiti.in, a financial advisory platform.

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