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Senior Citizens’ Savings Scheme or PM Vaya Vandana Yojana? Answers to your personal finance queries

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Readers can ship in queries on personal finance and investing to [email protected]

Q. I’m 22. Once my father retires from the State electrical energy board he’ll get pension, a lump sum quantity and different advantages. How can he make investments to acquire monetary autonomy?

A. In the next ideas the place mutual fund is talked about, use them sparingly and provided that your father’s pension, by itself, fully covers his month-to-month bills. Else, stick to the opposite choices elaborated.

Create an emergency corpus of 3-6 months’ bills. These have to be partly in financial institution financial savings account and the remaining in short-term FDs of six months to one yr so as to break them any time. Then, discover the next:

Senior Citizens’ Savings Scheme (SCSS) and the federal government’s pension scheme PM Vaya Vandana Yojana (PM VVY via LIC), would be the prime choices. He can make investments a most of ₹15 lakh in every. Note PMVVY’s price will change submit March 2021 however that’s okay. Rates will nonetheless be higher than that on FDs. The third choice is RBI Floating Rate Bonds with a lock-in of seven years, with curiosity payout. There isn’t any most restrict on this. All these choices will generate common revenue for your father and importantly, present full capital security. The revenue from all of them can be taxable at his slab price.

Beyond this, two non-compulsory investments he might take into account are high quality company deposits from prime non-banking monetary firms such because the HDFC or the Sundaram Group. At current, the charges aren’t enticing but when they do get higher in a yr’s time, you could possibly take into account them.

The closing choice, which ought to account for a small chunk and that too provided that your father understands them (and has enough revenue), is debt mutual funds (MFs).

Look at a minimal three-year interval to spend money on company bonds or banking and PSU debt funds. These could have high quality papers, with marginally larger returns than FDs, and tax effectivity (if he’s within the 20-30% tax slab). The returns aren’t fastened or assured. So, there’s positively some threat right here. Use the primary three choices properly and hold company deposits and MFs because the final choice for small diversification if the corpus is massive.

Q. I’m a 23-year-old mechanical engineer with a month-to-month wage of ₹25,000. My dad is retired and will get a month-to-month pension of about ₹30,000. At current, our complete month-to-month investments are — ₹5,000 in fairness mutual fund, ₹5,000 in RD with 6% curiosity and ₹10,000 in gold chit funds. How can I diversify my portfolio and enhance returns?

A. It is nice to know you might be saving early. Just to preserve your father’s monetary independence, try to hold each your financial savings distinct in order that the risk-taking potential for each is demarked and he needn’t rely upon his youngsters in future. For your father, if he has any lump sum invested in FDs, he might shift some to avenues reminiscent of Senior Citizens’ Savings Scheme (accessible in submit workplace/SBI and different PSU banks) and likewise take into account RBI Floating Rate Bonds. These will present the much-needed security of capital and common revenue to increase his pension revenue, if he wants extra in future.

As for you, fairness funds and RDs are good, supplied you don’t lock into lengthy intervals in FD on this present low-interest situation. You can hold it quick (one yr) and renew it. Your total portfolio has 50% in gold, which is a significantly excessive publicity and that too, via much less regulated or unregulated avenues. Reduce gold to 15-20% and lift your fairness part to 50-60%. Financial financial savings in gold via gold funds or bonds are higher choices than gold chit funds which might be dangerous and have hidden prices. For fairness, have a time-frame of not lower than 7 years. In the years in between, be ready for low returns or even detrimental returns.

(The writer is co-founder, Primeinvestor.in)

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