“The first rule is that you should park some amount as an emergency fund. This fund is kept in case of some unforeseen event and you require funds on an urgent basis. Keep at least 3 months of salary as your emergency corpus or if you want from a specified amount, at least keep 10% of your total investment in the emergency fund," said Sayyam.
If you’re a young investor who is seeking to deploy ₹5,00,000 in new age investment options, I would ask you to start by ensuring you have already ticked off the basics, said Nikhil Aggarwal, Founder & CEO at Grip.
“Before exploring new avenues of investing you must ensure you have the right insurance cover and an emergency fund in place that you can use to instantly withdraw money in case life throws you a curveball. Besides this you should have allocated some money to a traditional investment option such as mutual funds via a SIP - while boring, compound interest is an investor's best friend," Nikhil said.
Alternative investment options
Once you have this stable base you can explore alternative investment options that include assets like corporate bonds, asset leasing, inventory finance, commercial real estate, and start-up equity. According to Nikhil these options offer you between 8% to 22% pre-tax IRR and can be a great way to diversify your portfolio while earning lucrative returns.
“At least 10-15% should be invested in bonds and debentures. The reason for this is volatility in the market. In the events of unexpected volatility like we saw at the times of Covid and the Russia-Ukraine war. One should have invested in such instruments which will give safe returns, no matter the market scenario. Go for government bonds to get safe and fixed returns," said Sayyam Agarwal.
Diversify your portfolio
How you diversify across these asset types depends on your life goals and cash flow. Options such as leasing and inventory can give you monthly payouts, exciting returns, and tenure options ranging from 2 months to 2 years.
"If you’re more conservative but still want regular payouts you can consider corporate bonds that offer comparatively lower returns and risk. If you have a long-term outlook on real estate or specific sectors you can get exposure via commercial real estate and startup equity respectively," said Nikhil.
Invest at least 40% in mutual funds
According to Sayyam Agarwal, one should invest at least 40% in mutual funds. Now Mutual funds come in various types. Some are tax saving, growth, risky, safe, etc. “Divide your 30% amount into these segments. ELSS or tax-saving funds have a lock-in of 3 years and help in tax exemption," he said.
As per Sayyam, some good ELSS are- the IDFC tax advantage (ELSS) fund, Canara Robecco equity tax saver, and Mirae asset tax saver fund In growth you have large cap, midcap, and small-cap funds. Depending on the risk that you are willing to take, you can invest in them. Small cap is the riskiest, then comes midcap and then large cap.
Sayyam suggested some good funds in large, mid, and small-cap.
Some good funds in large-cap
Axis Bluechip fund, Canara Robecco Bluechip equity fund, Mirae asset large-cap fund.
Some good midcap funds
Quant midcap fund, Motilal Oswal midcap fund, SBI Magnum midcap.
Some good small-cap funds
Nippon India small cap, Kotak small cap fund, Axis small-cap fund.
Mahindra & Mahindra. ICICI Bank, and Bharti Airtel are among some of the good shares suggested by Sayyam Agarwal, Head of Academics, Aspire Now Global (ANG)
Invest in Crypto
Sayyam cautioned investors not to enter the crypto market without any proper knowledge. "But if you want to invest in it, invest only in stable coins like bitcoin, Ethereum, Binance coin, Matic, etc. Disclaimer- This is for educational purposes only. Do your research before investing," he added.