Investment in mutual fund in India for long term goals
Buy only 'Direct' Plans, not regular. - Demat providers won't sell Direct plans, that you can do it through https://www.mfuindia.com Make sure expense ratio < 2.5% (With direct plans it will be much lesser) I hope these points will help you to take a better decision. On reading couple of articles & some research over internet, I got to know about diversified investment where one should invest 70% in equity related & rest 30% in debt related funds Yes that is about right. Although the recommendation keeps varying a bit. However your first investment should not aim for diversification. Putting small amounts in multiple mutual funds may create paper work and tracking issues. My suggestion would be to start with an Index EFT or Large cap. Then move to balanced funds and mid caps etc.  On this site we don't advise on specific funds. You can refer to moneycontrol.com or economictimes or quite a few other personal finance advisory sites to understand the top funds in the segments and decide on funds accordingly. PS: Rather than buying paper, buy it electronic, better you can now buy it as Demat. If you already have an Demat account it would be best to buy through it.
Something not in answers so far:  define your goals.  What is important to you? My goals, if I were in your shoes, would include a debt-free home, passive (investment) income so I would not have to work, and have health insurance covered.  I could think of many more details, and already have, but you get the idea. To help determine which investment information to learn first, consider how much risk you can tolerate.  I know that's vague at this point, but if you're looking for safe investments first, you could learn about mutual funds, and then index funds specifically.  At the risky extreme, you could learn about stock options, but I would not recommend such risk. If I were in your shoes (I would be extremely happy), here's what I would do: Get on a detailed budget, if you aren't doing one already. (I read the comments and you seemed unsure about certain things.)  Once you know where your money is going, you can do a much better job of saving it. Retirement Savings: Contribute up to the employer match on the 401(k)s, if it's greater than the 5% you are already contributing. Open a Roth IRA account for each of you and make the max contribution (around $5k each).  I would also suggest finding a financial adviser (w/ the heart of a teacher) to recommend/direct your mutual fund investing in those Roth IRAs and in your regular mutual fund investments. Emergency Fund With the $85k savings, take it down to a six month emergency fund.  To calculate your emergency fund, look at what your necessary expenses are for a month, then multiply it by six.  You could place that six month emergency fund in ING Direct as littleadv suggested.  That's where we have our emergency funds and long term savings.  This is a bare-minimum type budget, and is based on something like losing your job - in which case, you don't need to go to starbucks 5 times a week (I don't know if you do or not, but that is an easy example for me to use).  You should have something left over, unless your basic expenses are above $7083/mo. Non-retirement Investing: Whatever is left over from the $85k, start investing with it. (I suggest you look into mutual funds) it.  Some may say buy stocks, but individual stocks are very risky and you could lose your shirt if you don't know what you're doing.  Mutual funds typically are comprised of many stocks, and you earn based on their collective performance. You have done very well, and I'm very excited for you. Child's College Savings: If you guys decide to expand your family with a child, you'll want to fund what's typically called a 529 plan to fund his or her college education.  The money grows tax free and is only taxed when used for non-education expenses.  You would fund this for the max contribution each year as well (currently $2k; but that could change depending on how the Bush Tax cuts are handled at the end of this year). Other resources to check out: The Total Money Makeover by Dave Ramsey and the Dave Ramsey Show podcast. Risk. Volatility. Liquidity. Etc.  All exist on a spectrum, these are all comparative measures.  To the general question, is a mutual fund a good alternative to a savings account? No, but that doesn't mean it is a bad idea for your to allocate some of your assets in to one right now. Mutual funds, even low volatility stock/bond blended mutual funds with low fees still experience some volatility which is infinitely more volatility than a savings account.  The point of a savings account is knowing for certain that your money will be there.  Certainty lets you plan. Very simplistically, you want to set yourself up with a checking account, a savings account, then investments.  This is really about near term planning.  You need to buy lunch today, you need to pay your electricity bill today etc, that's checking account activity.  You want to sock away money for a vacation, you have an unexpected car repair, these are savings account activities.  This is your foundation.  How much of a foundation you need will scale with your income and spending.   Beyond your basic financial foundation you invest.  What you invest in will depend on your willingness to pay attention and learn, and your general risk tolerance. Sure, in this day and age, it is easy to get money back out of an investment account, but you don't want to get in the habit of taping investments for every little thing. Checking: No volatility, completely liquid, no risk Savings: No volatility, very liquid, no principal risk  Investments: (Pick your poison) The point is you carefully arrange your near term foundation so you can push up the risk and volatility in your investment endeavors.  Your savings account might be spread between a vanilla savings account and some CDs or a money market fund, but never stock (including ETF/Mutual Funds and blended Stock/Bond funds). Should you move your savings account to this mutual fund, no.  Should you maybe look at your finances and allocate some of your assets to this mutual fund, sure.  Just look at where you stand once a year and adjust your checking and savings to your existing spending.  Savings accounts aren't sexy and the yields are awful at the moment but that doesn't mean you go chasing yield.  The idea is you want to insulate your investing from your day to day life so you can make unemotional deliberate investment decisions. You didn't give enough information.  What is your goal?  What is your financial situation?   A discount to buy company stock can seem very tempting.  I was tempted by it myself, gee, almost 20 years ago.  I still own some of the stock.  But I held mutual funds first. There are two disadvantages that have disuaded me from partaking in the ESPP of my subsequent employers (one of which was a spin-out company of the stock-issuing company, the other having bought the spin-out).  First, putting a bunch of money in a single stock is rather risky.  single stocks will drop dramatically due to market conditions.  Generally market conditions don't act so dramatically on all stock.  Second, is it wise to put not only your salary but also your saved wealth all in one basket? It worked out reasonably well for me.  The stock doubled right before my division was spun out -- I sold half of my position.    And the resulting stock has continued to provide opportunities to diversify.  However, it could have just as easily dropped in half instead of doubled. What is your timeline for holding the stock -- for realizing any gain?  Can you afford patience if the stock value should drop in half? I have co-workers who continue to invest through our new company's ESPP.  At least one co-worker has the stated goal to sell after every purchase -- he holds the stock long enough to make a long-term gain instead of short term, but he sells after every purchase.  And it seems to him that the stock always drops right when he wants to sell. Placing bets on targeted sectors of the market totally makes sense in my opinion.  Especially if you've done research, with a non-biased eye, that convinces you those sectors will continue to outperform.   However, the funds you've boxed in red all appear to be actively managed funds (I only double-checked on the first.)  There is a bit of research showing that very few active managers consistently beat an index over the long term.  By buying these funds, especially since you hope to hold for decades, you are placing bets that these managers maintain their edge over an equivalent index.  This seems unlikely to be a winning bet the longer you hold the position.   Perhaps there are no sector index funds for the sectors or focuses you have?  But if there were, and it was my money that I planned to park for the long term, I'd pick the index fund over the active managed fund. Index funds also have an advantage in costs or fees.  They can charge substantially less than an actively managed fund does.  And fees can be a big drag on total return. Given that you are starting with a relatively small amount, you want a decent interest rate, and you want flexibility, I would consider fixed deposit laddering strategy. Let's say you have ₹15,000 to start with. Split this in to three components: Purchase all of the above at the same time. 30 days later, you will have the first FD mature. If you need this money, you use it. If you don't need it, purchase another 90-day fixed deposit. If you keep going this way, you will have a deposit mature every 30 days and can choose to use it or renew the fixed deposit. This strategy has some disadvantages to consider: As for interest rates, the length of the fixed deposit in positively related to the interest rate. If you want higher interest rates, elect for longer fixed deposit cycles.For instance, when you become more confident about your financial situation, replace the 30, 60, 90 day cycle with a 6, 12, 18 month cycle The cost of maintaining the short term deposit renewals and new purchases. If your bank does not allow such transactions through on line banking, you might spend more time than you like at a bank or on the phone with the bank You want a monthly dividend but this might not be the case with fixed deposits. It depends on your bank but I believe most Indian banks pay interest every three months If you are going to the frenzy of individual stock picking, like almost everyone initially, I suggest you to write your plan to paper. Like, I want an orthogonal set of assets and limit single investments to 10%. If with such limitations the percentage of brokerage fees rise to unbearable large, you should not invest that way in the first hand.  You may find better to invest in already diversified fund, to skip stupid fees. There are screeners like in morningstar that allow you to see overlapping items in funds but in stocks it becomes trickier and much errorsome. I know you are going to the stock market frenzy, even if you are saying to want to be long-term or contrarian investor, most investors are convex, i.e. they follow their peers, despite it would better to be a concave investor (but as we know it can be hard).  If the last part confused you, fire up a spreadsheet and do a balance. It is a very motivating activity, really. You will immediately notice things important to you, not just to providers such as morningstar, but alert it may take some time. And Bogleheads become to your rescue, ready spreadsheets here. "Long term: Assuming you sold stock ABC through a registered stock exchange, e.g., the Bombay Stock Exchange or the National Stock Exchange of India, and you paid the Securities Transaction Tax (STT), you don't owe any other taxes on the long term capital gain of INR 100. If you buy stock BCD afterwards, this doesn't affect the long term capital gains from the sale of stock ABC.  Short term: If you sell the BCD stock (or the ABC stock, or some combination therein) within one year of its purchase, you're required to pay short term capital gains on the net profit, in which case you pay the STT and the exchange fees and an additional flat rate of 15%.  The Income Tax Department of India has a publication titled ""How to Compute your Capital Gains,"" which goes into more detail about a variety of relevant situations."