How should I invest my Rs 70000 salary if I need to save up for marriage in two years and need a good amount of liquidity?

Written on Apr 13 2016

Normally, as a personal policy, I don't answer anonymous questions as part of A2A. However, I am making an exception and providing you with some possible options.

The first thing is to check if you have availed all the tax exemptions in India, check this: Gopal Kavalireddi's answer to How do I save my income tax? The reason I am asking you to check the taxes is to see if there is any possibility of saving more money.

There are many ways to invest but investing systematically will help you in the long run. But, before you start investing off, the first thing to do is have 6 months worth of your expenses in your bank account. This is because incase you lose your job (assuming you are a salaried employee) you will not have income, but expenses only till you find the next job. This money is to tide you over that period, which you can leave in an FD earning 7.25% pre tax.

U need to take health insurance (take separately even if your employer provides one for you) for yourself (assuming you are single) early on, so that you can get exemption on pre-existing diseases later on. A Rs. 3 lakh policy should be more than sufficient if you are single, which can be increased to Rs. 5 lakh later on, upon marriage or when you have children. Useful for tax exemption.

After that you need to take term insurance (life insurance) to the amount equal to the liabilities/loans that you have so that incase of any unfortunate circumstances they will be paid in full. Term insurances are cheap in earlier part of life when you are young. A 1 cr term plan will cost you less than Rs. 10,000 annually. Useful for tax exemption.

Once you have secured all the above then you should start investing.

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U need to diversify your investments to average out your risks and also normalize your returns over a longer period. Before you think of investing in stock market through a diversified portfolio of stocks, invest in less riskier assets to get a proper understanding of investments and returns.

• PPF, Tax saving as well as government bonds will yield anywhere between 6 - 9% on an average investment over a 15 year period.
• Liquid funds, fixed deposits, debentures will yield a post tax return of 6.5% on an average holding period of 3 - 5 years.
• Equity mutual funds, direct investing in stock markets will yield more than 18% compounded annually on an average, if your holding period is more than 15 years.
• If you have any earning left after investing all the above, you can look at investing in stock market directly or buying a property/house and pay EMI.

Since you are not married and this doesn't apply to you at present but you can use this at a later time. If you have a girl child aged <10 years, then you can invest in the Sukanya Samruddhi Yojana for a maximum amount of Rs. 150,000. Details of the same are provided here. [1]

First, start investing in PPF for the maximum limit of Rs. 150,000 each year for an interest of 8.1% compounded annually for a period of 15 years, this will yield a sizable sum which you can use in 15 years for your other needs. PPF also helps you in meeting the 80C requirements (tax exemption). Calculations for PPF are as follows:

Second, Invest around 15% of your monthly earnings in liquid funds, this will help you secure 7.25% post tax as well as provide you with liquidity incase of emergencies. Alternately, u can use this amount for marriage also, incase you don't use it for the next 2 years.. I am including some of the schemes with AUM > 500 Cr. from various fund houses, so that you can compare and invest accordingly.

The best fund among all is JM High Liquidity Fund Dividend option and the returns are as follows:

U can also buy gold ETF's or bonds as part of investment diversification - not more than 10% of your portfolio.

Third, start investing in SIP of mutual funds - fixed amounts in the beginning and then start increasing the allocation by 10- 15% each year, as your earnings increase. There are many good mutual funds that should get you started off. If you complete all these then you can start investing in direct equities, in small amounts across varied sectors.

Based on the risk profile and the duration of investment, you can pick a predefined portfolio for your as well as for your family.

Invest Rs. 14,000 per month (or an amount based on your monthly income & savings) through SIP of 5 - 7 mutual funds spread across categories, meaning Rs. 2,000 in each SIP.

Out of the below mentioned schemes offering good returns, Pick 1 scheme from each sector/class. Picking 2 funds in small and midcap is important, they act as a booster for your returns in some years giving 50 - 60% returns. Important to pick dividend reinvestment option, so that any dividend declared will be reinvested for you to get more units at a lower price as compared to future years.

1. Pharma

2. Banking

3. Technology

4. Power or Transport &Logistics

5. FMCG

6. Large Cap

7. Small and Mid cap (S&M Cap)

8. Small and Mid cap (S&M Cap)

9. Diversified Equity

10. Balanced

You can do this allocation for a period of 20 years, then I am sure you will have sizable amount that would have compounded at the rate of 15 - 18% each year. This would be a good financial security for your and your family for later years.

Hope I have been able to provide you some direction. Incase you have any questions, please feel to write and I will be happy to help you out to the best of my knowledge.

Happy Investing.

Source credits: Author’s earlier answers relating to similar queries

Image credits: google images.

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[1] Gopal Kavalireddi's answer to I like invest 10000 per month for my new born babygirl; Where I can get best refund?

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