As a startup employee, how should I invest for retirement?

—Name withheld on request

For retirement, we would suggest you to invest in both PPF and NPS. Investing in PPF will give you EEE tax benefits, that is, you will get a deduction when you invest and both your interest and maturity amount will not be taxed. When you invest in NPS, you get a deduction under section 80CCD (2) of the Income Tax Act. This deduction is available even in the New Tax regime. NPS will provide a good blend of debt and equity. At retirement, you can either purchase an annuity with the maturity amount or withdraw a lumpsum of 60% of your NPS balance. It is always advisable not to mix insurance and investment. You may purchase a simple term life insurance cover, which would assist your dependents in case something unfortunate happens to you.

For your investments, we suggest you to invest in equity mutual funds including index fund, mid-and small-cap fund providing exposure across categories with allocation on the basis of your risk profile. These should set you up for your retirement.

I am 25. I want to build corpus of ₹10 crore. I invest via monthly SIPs in HDFC Focused Fund ( ₹5,000), ICICI Focused ( ₹5,000), UTI Nifty 50 Index ( ₹5,000), PGIM Mid Cap ( ₹2,000), Axis Small Cap ( ₹2,000), Quant Small Cap ( ₹2,000). My monthly salary is ₹55,000. I have ₹1.5 lakh in NSC, ₹1.5 lakh in EPF, ₹50,000 in Nippon Money Market. I plan to maintain 70:30 asset allocation, in equity and debt, respectively. Please advise if my plan is okay?

—Name withheld on request

We would suggest you to reduce the number of funds in your portfolio with a combination of index funds, mid- and small-cap funds. This should suffice: UTI Nifty 50 Index Fund, PGIM Midcap Opp. Fund, Axis Small Cap, Quant Small Cap Fund, can form part of your mutual fund portfolio. Multiple small cap funds are selected to diversify risk and volatility associated with small caps. We think your allocation breakup across large, mid and small cap funds is appropriate and you can continue with it. We would suggest you to step up SIPs every year based on your liquidity position, which will assist to achieve your goal of ₹10 crore.

You can also follow the 100 minus age allocation for equity-debt asset allocation, which will adjust the risk profile. Based on financial goals planning, for example, purchasing a house, children’s education, etc., you can adjust the asset allocation in order to fulfil the respective goals.

Vijay Kuppa is chief executive officer of InCred Money (formerly known as Orowealth)

Updated: 07 Jun 2023, 10:36 PM IST