Investment advice: I am a 28-year-old male who recently experienced a loss and will soon have approximately Rs 10 lakh in cash coming into my account. Even though I am employed and married, this is a substantial amount of money for me, and I am unsure how to best utilise it.
I am inclined towards low-risk options and prefer to avoid high-risk investments such as real estate or stocks. I am seeking advice on how to generate a minimum return with close to zero risk, as I am hesitant about the possibility of even major banks failing. I would appreciate any guidance on how to strategically deploy this money to secure my financial future. Thank you for your advice.
Reply by Akhil Rathi, Vice President, Financial Concierge at 1 Finance.
First, it is essential to reflect on the recent loss you experienced and identify its root cause. Was it due to bad financial habits, a lack of planning, or an unavoidable situation? Understanding this will help you address any underlying issues and prevent similar setbacks in the future. Building strong financial habits is the foundation of wealth creation and preservation. It’s equally important to evaluate your current financial priorities, especially since this amount holds significant value for you.
Before considering investments, ensure that your financial safety net is secure. Start by building or bolstering an emergency fund—a reserve of at least 6–12 months of essential living expenses that can cover unexpected events such as job loss or medical emergencies. This fund can be held in highly liquid and safe instruments like bank savings accounts or liquid mutual funds. Next, review your health insurance and life insurance coverage to protect yourself and your family from unforeseen financial strain. Opt for a term life insurance policy and a comprehensive health insurance plan if you don’t already have these in place.
Once your financial safeguards are in order, you can explore low-risk investment options like bank fixed deposits (FDs), which are a reliable choice. They are insured up to Rs 5 lakh by the Deposit Insurance and Credit Guarantee Corporation (DICGC), making them a safe bet for low-risk investors like you. Additionally, government bonds, such as RBI Floating Rate Savings Bonds and other bonds, provide stability and returns backed by the Government of India.
If you already have an emergency fund and insurance in place, consider diversifying a small portion of your money into equity mutual funds and gold to combat inflation and ensure long-term wealth growth. While stocks carry some risk, investing in diversified index funds over the long term can provide stable returns. For gold, Sovereign Gold Bonds are ideal since they not only appreciate with market prices but also offer an annual interest payout.
By strategically deploying your Rs 10 lakh, balancing safety and growth, you can secure your financial future and gradually build wealth. Always revisit your financial goals periodically to ensure they align with your changing circumstances.