I am young, unmarried. Where do I invest?

This is the phase when you can take maximum risks with your investments as you have no dependents or, for that matter, even other financial responsibilities.

Needs: Your immediate and short-term needs are probably to find a partner and get married. That would come with its share of financial decisions, such as expenses to run a home and maybe a dependent spouse if your spouse is not working.

In the medium term, you plan to buy your own home by taking a loan and that would mean saving up for a down payment.

Your longer-term goals could be to provide your children with a good education and also plan out your funds your own retirement.

Choice of investments

Short term (less than 5 years): In the short term, you need to invest in instruments that provide liquidity and carry low risk.Investing in equities is not a good option for the short term since returns in equities are highly volatile and you run the risk of losing your money. Instead, for the short term, liquid mutual funds, bank fixed deposits and short term bonds prove a good option for you. Medium term (5-10 years): In the medium term, you may not require liquidity, but at the same time, you cannot take big risks either. Hence, you can look at debt instruments that offer a slightly higher lock-in and hence, offer higher returns too. For instance, National Savings Certificate (NSC), Kisan Vikas Patra (KVP), RBI bonds - all make for good investments as they provide returns of 8 per cent and have a lock-in of 6-8 years. You may also look at debt or even balanced mutual funds. Long-term (more than 10 years): Your long term needs are at least 10 years away. That gives you the chance to benefit from equities, which, although risky in the short term, are known to provide great returns in the long term. So equity mutual funds would be a good option to consider here. In addition to these investments, you must also invest in insurance to cover your car loan liability. Buying insurance when you are young will give you the benefit of lower premiums. Hence, consider buying a substantial term insurance cover that will serve your needs for the medium term. You can always consider increasing the cover later on.

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