Investments are best pursued when started early and long term investments plans are best suited when they are exposed to risk- equities. However, for a well balanced portfolio, it is necessary that you invest a part of your funds into debt funds. Investing in debt funds can guarantee you capital protection upto a certain level.
Also if you invest all your funds into equities, in case of a downturn all your returns will be minimized to zero or may even become negative. Opting for a loan like a personal loan, home loan etc may be your only option if you do not have the required funds to finance your requirements. In the scenario of fluctuating financial stability in the market due to changes in the inflation rates, the real cost of loan can increase which will take away a major portion of your finances in the form of EMI payouts.
In order to safeguard yourself from such credit risks, it is important that you balance your portfolio by investing in debt funds. Debt funds as mentioned above provide good capital protection to your portfolio by giving you fixed interest and giving you protection from market volatilities. For debt funds, the best option is a Public Provident Fund account (PPF). Exhaust the maximum limit of Rs 70,000 by choosing your investment period and watch your money grow over the period of 15 years. Apart from this you can choose to invest in traditional assets like the Fixed Deposits (FDs), or recurring deposits (RDs) etc. Although they are suggested, investing a huge chunk of your savings in FDs for a very long period of time is not recommended. Instead a prudent decision would be to encompass a good mix of short term debt funds, Fixed Deposits (FDs), Monthly Investment Plans (MIPs) etc to constitute your portion of debt in your portfolio. Monthly Investment Plans (MIPs) are generally funds that predominantly invest in debt and also give you an equity exposure of 15-20%. National Pension System (NPS) is also another good option as it can give you regular monthly payouts. Under NPS you have a quite a few choices so, if you are young and have just started investing you can choose the scheme that has good equity exposure.
It is important that you be serious about your savings initiative and start saving as your career kick starts. Doing so, you as an investor, are benefitted from high returns since you have managed to invest a regular amount consistently till it is actually required. The best way by which you can earn higher returns is by investing monthly a regular amount in the form of Systematic Investment Plans (SIPs). By doing so you will be able to monitor the performance of your funds and re assess them at least once evry year. You can choose about 4-5 equities linked Mutual Funds from various categories like small cap, small-mid cap, mid cap, mid-large cap, large cap, sectoral funds, diversified funds etc.
If you have a short term goal; goals that are to be completed in a period less than 3 years; it is best that you do not opt for equities. Investing in Recurring Deposits (RDs) or FDs can prove to be beneficial. Investing in equities although they might be better performing funds may not be able to give you positive returns if it is in the short term since you will not be able to stay afloat market irregularities in the short term. Therefore, opting for deposits that provide security from such market fluctuation can help you accumulate enough funds in order to finance your requirements without the need of any external debts.