How should I allocate the monthly savings of ₹50k for the long term?

—Sudipto Mandal

Before you turn to wealth creation, make sure you have taken care of your ‘business emergency’ funds. While there are rules of thumb for a personal or family emergency fund (usually the equivalent of six months’ worth of one’s salary), there are no rules for a business emergency fund. So, you have to decide the amount required for this and keep it aside. This part of your corpus can be kept in ultra-low risk options like FDs or liquid funds. Then, you can turn your attention to wealth creation.

Proper asset allocation and good investment options are the keys to long-term wealth creation. In your case, since you are investing for a long period (8+ years), you can consider an equity heavy portfolio. An overall allocation of 80% in equity funds would be an acceptable level of portfolio risk. Within this 80%, around 10-20% can be set aside for direct investment in stocks, preferably bluechip stocks. The remaining 60-70% can go into equity MFs – mainly diversified (flexi-cap category) funds.

Funds are a reasonable choice in your current portfolio – although there are two tax-saving funds that don’t usually find a place in a traditional equity fund portfolio. You can consider replacing one of these with an index fund that invests in the Nifty 100 index. Of the total portfolio, out of the 80% equity allocation, the remaining 20% ​​should be kept in short and ultra-short term debt funds to give some stability to your portfolio.

Srikant Meenakshi is the co-founder of PrimeInvestor.