How to start financial planning in your 20s

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A financial plan is extremely essential for a secured future. Being disciplined and responsible towards finances at an early stage can go a long way in ensuring a fulfilled life. If an investors parks his money in the right instrument, he/she will be able to achieve financial goals seamlessly.

The Money9 Helpline hosted Kairos Capital’s Rishad Manekia to help our callers resolve queries on how to get started with financial planning in their 20s and how to make goal-based investments.

Edited excerpts

Anamita Biswas: Since the debt instruments are not providing satisfactory returns, I want to invest in MF’s. I want to invest Rs 5000 per month via SIP, kindly suggest a fund that can provide good returns.

Manekia: I think it is not fair to compare debt instruments to an equity instrument, one thing an investor should always keep in mind is that if I’m moving from a fixed deposit (FD) to a mutual fund then they will be taking additional risk. So the question you need to ask yourself is –“Am I comfortable in taking that risk?” In an FD you may not see the fluctuations in the price of the funds but if you compare it with a debt mutual fund you will see the variations in the portfolio. So, if you are comfortable with that risk-taking then you should go for it, as it is been said the higher the risk is the higher return you will get. It doesn’t mean you have to go 100% in equity, you can do it step by step, take risks to learn how it works then go for SIP and debt funds.

Pallabi: I got my first job 6 months ago, some of my friends have suggested investing in mutual funds. I can invest up to Rs 12000 per month. What should be my long-term investment goal and what funds can help me achieve it?

Manekia: So, definitely if you have a long-term horizon then there is no asset class that can beat equity. Investing through SIP over the long term is one of the tried and trusted methods for investors to make wealth over time. When you are investing for the long term you should just cross-check if you are investing Rs 12000 per month, if your expenses are around the same value then you have to save up for 20-30 years and that corpus has to last for the next 20-30 years. You have to give it a thought if the amount you are investing is sufficient. Equity mutual funds are the right funds, you can also start with large-cap funds and once you get comfortable with the risk you can expand the reach by investing in midcaps and Flexi cap funds.