Planning to invest Rs 5-10 lakh? Here are some options for Robinhood investors

The good part is that many investors who have joined D-Street in 2020 are young and have age on their side, and additionally they don’t mind taking that extra risk.

After hitting multi-year lows in March, benchmark indices have showcased strength rallying about 50 percent backed by ample liquidity and record retail participation.

‘Make hay while the sun shines’ might work for new-age investors as liquidity remains strong, but the real wealth creation would happen if they make a portfolio and diversify their risk to mitigate volatility.

“The retail participation in the direct equity market saw a huge surge with an evident from new account opening with a brokerage firm along with a rise in trading volumes during the lockdown period. The trend is heartening to see as investors become more rational about investing as opposed to the situation which was seen in the previous crisis,” Dinesh Rohira, Founder, CEO, 5nance.com told Moneycontrol.

“A 25-year-old investor can allocate a higher percentage (30-40 percent) of their income as they will usually have less financial obligations. They should give more weightage to equities with an investment view of 15-20 years,” he said.

Rohira further added that it is also imperative for investors at this age to limit their financial leverage by way of credit or borrowing to avoid debt burdens at later stages of life to attain financial independence.

Expert: Paras Matalia, Head-StockBaskets, Samco Securities

As a thumb rule, asset allocation can be looked at using the “100 minus your age” strategy wherein if you are 25, then you can invest 75 percent of your capital to equities and the remaining into debt. But it isn’t what we follow!

We suggest bifurcating your capital into three parts:

1) Money that you might need in the next 5 years- keep this away from equity, can be invested in debt funds;
2) Money that you do not need for the next 5 years- invest this money only in equity; and
3) Money that you do not need for the next year at least - invest in gold or other asset classes (3-5 percent of your portfolio).

Allocation is subject to risk appetite. However, a moderately aggressive investor looking to achieve retirement in 15-20 years can consider allocating 60 percent of total assets to equity, 30 percent to debt, and 10 percent to gold, ETFs, PPF, etc to even out risks. You can keep rebalancing this percentage as you near your investment objective.

Towards the end, consider reversing the percentage; 20 percent equity and 80 percent debt. This will ensure your risk is minimised by the time you choose to redeem your funds after reaching the desired retirement corpus.

Expert: Siddharth Panjwani, Chief Strategy Officer, Pickright Technologies

This Independence day, a millennial aged 25 years can use this opportunity of having time on his/her side to have a deep think-through of his/her financial journey, choices, and financial destination.

The next question is what should the goals be and how much is the amount needed for financial independence. This can vary very widely depending on lifestyle, but to put numbers to the issue at hand – let’s say that, currently a family of 4 including 2 kids in an Urban setting can survive at an annual expense of Rs 15 lakh, including Rent/ EMI, school fees, vacations, and entertainment.

For someone who is 25 now, this expense would balloon to about 31 lakhs in 15 years assuming constant inflation of 5 percent. If the annual return from investment is say 12 percent, this annual expense would be taken care of by the return on an investment corpus of about Rs 2.6 crore.

So, an investor aged 25 now has 15 years to be in a position for their returns on investment to take care of their annual expenses assuming they starts saving for that goal.

This would mean a monthly (family) saving of about Rs. 51,500, assuming an annual return of 12 percent on investments. This is a very simplistic case with basic assumptions to and would need to be reviewed regularly as changes in life, career, geography occur, nonetheless it gives a sense of the economics involved.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.