I’m a working professional aged 26 earning Rs 2.5 lakh a month. Where should I invest savings of Rs 12 lakh for 7-10 years?

I’m 26 and a working professional earning Rs 2.5 lakh per month from consulting. I invest Rs 70,000 a month, Rs 60,000 per month in mutual funds and Rs 10,000 per month in VPF. MFs are small-cap (Quant), mid-cap (PGIM), Quant absolute fund, debt (Nippon India Nivesh), and quant tax. I have investments of over Rs 22 lakh and savings of Rs 12 lakh cash in the bank. I want to invest for at least 7–10 years. I want to know where else to invest and how much to put in. 

Reply by Rajiv Bajaj, Chairman & MD, BajajCapital Ltd 

It sounds like you’re making some smart moves with your investments! Allocating 60 per cent of your monthly savings to equity mutual funds at 26 is generally a good choice because you have time on your side to ride out market fluctuations. This can potentially lead to substantial growth over the long term. Putting 10 per cent of your savings into a debt fund is a wise move to lower your risk profile. However, I noticed you’re using a short-term debt fund. While it’s a safer option, it may not be as diversified as a long-term debt fund like corporate or government bond funds. Switching to a long-term debt fund could offer more stability.

Have you considered a balanced fund? These combine equity and debt components, providing a middle ground regarding risk and return. It’s a solid option to reduce risk without sacrificing too much potential return. Another interesting choice is a gold ETF, which tracks the price of gold without requiring you to buy physical gold. It can be a valuable addition to your portfolio, especially as a hedge against economic uncertainty.

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Lastly, real estate can be a great asset class. You should explore real estate investment trusts (REITs). They allow you to invest in income-producing real estate without the hassle of buying and managing individual properties.

Remember, the ideal allocation of your savings among these options depends on your risk tolerance, financial goals, time horizon, and liquidity needs. It might be a good idea to consult a financial advisor to fine-tune your investment strategy.

(Views expressed by the investment expert are his/her own. E-mail us your investment queries at askmoneytoday@intoday.com. We will get your queries answered by our panel of experts.)