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Try investing the remaining 15% or so in a Nifty-based equity index mutual fund.

Q. I’m an MBBS graduate. I have saved ₹75,000 from my internship and want to invest the same for the long term (3-4 years), gain returns and use them to fund my higher studies. What would be my best investment option?

Suhas G.

A. You have saved well. If you are unfamiliar with stock markets or equity mutual funds, you need to know that 3-4 years is not long term. It is short term. That essentially means that you cannot consider full exposure to equities believing it will deliver well, as equity investments need a minimum 5-7-year period and may still deliver single-digit returns. I would suggest that you invest 50-60% in short-term FDs and renew them at higher rates when interest rates move up. Try to invest in short-duration debt mutual funds for about 25% of the sum.

Please don’t choose funds based on extremely high returns. Go for middle-order funds and check if the funds invest in only quality AAA-papers. Categories such as banking and PSU debt will fit this.

Try investing the remaining 15% or so in a Nifty-based equity index mutual fund. Please know that this component can go up and down. You need to hold on.

Q. My monthly income is about ₹35,000 and I want to invest in the equity markets. Where can I get adequate returns? What would be the best timing for investing and the precautions I must take before investing?

Abhiranjan Maddheshiya

A. If you plan to invest directly into stock markets, you need to have the following qualities: one, invest for the long term and be patient. Two, do your homework thoroughly to pick stocks. Three, accept mistakes and make course correction instead of living with them.

If you are looking at short-term trading, then learning must be much more — almost full time and dedicated. You should set aside adequate income as buffer before you get into trading and make sure you can handle losses without any pressure of shortage of income or risk of taking debt.

If all the above seems too tough, take the mutual fund route, and invest in a simple equity index fund like the Nifty 50 or Nifty 500 through SIPs. Also, make sure you have debt exposure either through your provident fund or through simple, safe deposits and some 10-15% exposure to gold funds or Exchange traded funds.

This is needed to hedge the volatility arising from equity. Have a long-term outlook of at least 5-7 years and invest in a disciplined manner, whether the market falls or rises. There is no such time as the ‘best time’ to invest. SIPs are designed to ensure you do not need to time the market.

Q. I am a senior citizen and would like to invest in gold bonds. Is there a lock-in period? How safe is it? What’s the interest rate?

Sivakami Thyagarajan

A. If you are buying sovereign gold bonds (SGBs) to earn income, it is not a good idea. You may be better off choosing the RBI Floating Rate Bonds for income needs. SGBs earn 2.5% interest as of now.

They have a lock-in of 8 years, with an exit option in the fifth year. Although it is a government bond, its prices will keep fluctuating in line with gold prices and you will receive an amount close to the price of gold when it matures.

While they can be sold in the market, you can’t be sure you get a good price or sell it at all, as many of these instruments are thinly traded. It may be simpler for you to buy a gold fund or gold ETF, although they don’t carry interest rates, if your purpose is to just have some exposure to gold.

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

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