The Ideal Investment Portfolio for a Salaried Person

Posted in Mutual Fund Blogs By Poshita Bhatt - Dec 1,2021
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A salaried individual has a set monthly cash inflow, not only to manage their expenses but also to save, to achieve their life goals. A salaried person needs to have strong financial health and their investment portfolio, thus, is generally a mix of high-return, low-risk combinations.

Also Read: What is Passion Investing? Is it a Good Idea?

There are a lot of long-term and short-term investment options that a salaried person can opt for. Some financial assets that should be a part of a salaried person’s investment portfolio are mentioned below.

1. Mutual Funds

One of the most popular and preferred investment tools of salaried individuals, Mutual Funds (MFs), require money investment in market securities like bonds, stocks and short-term debt. They are subject to market risk and hence, one must do a risk evaluation before investing. MFs have the potential to give high returns in a short period but do not guarantee returns as they are subject to market fluctuations. Investing a fixed amount in mutual funds in the Systematic Investment Plan (SIP) format is a good option for salaried individuals.

2. Fixed Deposits

Considered as one of the most stable and safe investment options, Fixed Deposits (FDs), involve money to be deposited with banks/other financial institutions for a fixed tenor, between the range of 15 days to five years (and above). FDs are not impacted by market fluctuations and guarantee fixed returns. You can let an investor accumulate high returns and work on the compounding principle. Salaried persons who seek a healthy balance between safety and guaranteed returns should invest in fixed deposits.

3. Unit Linked Insurance Plan (ULIP)

A unique combination of life insurance and market-linked returns, a Unit Linked Insurance Plan (ULIP) provides you with the possibility of wealth creation and offers the security of a life cover too. It is one of the best investment instruments available as it allows an investor to align their investments with a life goal, fetches good returns and offers both death and maturity benefits. Though ULIPs have a lock-in period of 5 years, the investments made under them qualify for a tax rebate. Their dual benefits let salaried individuals grow their money systematically and also allow them to switch between funds as per their risk appetite or market situations.

4. National Pension System (NPS)

A government-owned and managed initiative, the National Pension System (NPS) is a long term retirement-focused investment instrument. NPS allows an investor to choose between equity, fixed deposits, corporate bonds, liquid funds, government funds and other alternative investment options based on their preference and risk appetite. The investments made remain locked in until the investor becomes 60 years of age and can also be extended up to 70 years. Investments and withdrawals made under NPS are both tax exempted. It is a good option for those having a minimal to zero risk appetite and wanting to save for retirement.

5. Direct Equity

A high-risk financial instrument, Direct Equity, allows an investor to directly invest in the stock market and reaps great benefits for those who can find the right balance between risk and return. An investor can buy the shares of companies listed on stock exchanges like the BSE and NSE. Equities can be liquidated at any point during a trading session and investing in them can be highly rewarding for those with a high risk appetite and adequate knowledge of the stock markets.

As you can see, some of the investment options mentioned above are fixed-income, while others are market-linked. Salaried individuals are advised to have a judicious mix of investments while keeping four factors in mind – risk appetite, time horizon, liquidity and tax slab. You can choose to invest in multiple investment products based on their life goals as well. An ideal investment portfolio for a salaried person would look like a healthy mix of various investment products.

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