I I just turned 29. My monthly take-home salary is Rs 24,000.

I have been married for less than a year and my wife works too. Her earnings go towards running the house while mine are mainly invested.

I contribute Rs 3,500 per month towards home expenses and spend Rs 3,000 to Rs 4,000 per month on food, drinks and shopping.

We do not plan to start a family for at least two years.

Take a look at my investments.

Insurance: Rs 14,900 per annum (Kotak ULIP), Rs 5,000 per annum (Kotak Term Plan), Rs 5,000 per annum (Royal Sundaram Mediclaim).

Mutual funds: Rs 20,000 in Reliance [Get Quote] Equity Opportunity Fund and Reliance ELSS (tax saving).

I would like to invest in Fidelity ELSS and SBI [Get Quote] Blue Chip.

I would like to open a recurring deposit of Rs 7,000 to Rs 8,000 per month.

Also, I would like to start saving for my child's schooling. If possible, I would like to holiday anywhere in India once a year.

- Valroy Miranda

Dear Valroy,

I will first put down figures, some of which you have given, some I am going to guess, so that it will at least give you a sense of direction even if my guess is wrong.

Annual salary: Rs 2,88,000

Insurance premiums per annum: Rs 25,000

Recurring deposit per annum: Rs 90,000

Expenses per annum: Rs 84,000

Holiday expenses per annum: Rs 30,000

You will also need around Rs 30,000 for pregnancy and related expenses in two years.

Budget for these. The balance will probably be consumed in taxes, investments and expenses.

We haven't tracked Fidelity because the fund has a very short history in our country. Neither do we track SBI Mutual Fund as they do not fit into our criteria for tracking funds.

Considering the state of stock market today, you may have less volatility if you invest in a value fund than a diversified equity fund.

Value funds are those in which the fund manager looks at the fundamentals of the stocks and invests in them, irrespective of whether or not other fund stock market players are bullish on them. Theoretically, the fund manager would not mind picking up a stock that the market hates, if he finds value in it. Similarly, the fund manager would not touch a hot favourite of the stock traders if they do not believe it is a good value proposition.

Templeton India Growth Fund and Prudential ICICI [Get Quote] Discovery Fund are supposed to be value funds. Value funds, due to their structure, are expected to be less volatile than other equity funds.

It will also help you to consider a Systematic Investment Plan when investing in equity mutual funds. This is better than a one-time investment. It will require you to invest fixed amounts every month in a mutual fund.

Over time, it lowers the risk you take because you get more units when the market falls and fewer units when it rises.

Equity Linked Saving Schemes have done well. These are diversified equity funds that offer a tax benefit. However, before you invest in them to save taxes, do remember that you are investing at a time when the stock market is at an all time high. There is substantial downside risk in equity funds in the next three years. In other words, the chances of losing money in this market appear far higher to me than the chances of making money. 

In my earlier pieces, I have always caution against Unit Linked Insurance Plans since I am not in favour of mixing insurance and investment.

Please do take into consideration the high upfront expenses and loads (fees) in such schemes while evaluating them.

I also have a thought regarding your recurring deposit. Why not consider a part of it as an SIP in a floating rate income fund? This is a mutual fund that will invest in fixed return instruments that have a floating rate and not a fixed rate. So if interest rates in the economy rise, so will your investments.

At the same time, the money will be available to you to withdraw whenever you want. Considering your tax bracket, the post tax returns might be a little lower, but in absolute terms, they might not matter much to you.

I do hope that helps. All the best.

• How to save for multiple goals

I am 27 with a monthly take home of Rs 27,000.

Current investments: NSC (Rs 30,000), PPF (Rs 30,000) and life insurance premium (Rs 32,000).

I would like to surrender my life insurance policy which is just a year old and trade it for a term insurance policy for 25 years.

Should I opt for a single premium or a one-time premium?

I want to invest less in PPF and NSC and invest more in diversified equity and balanced funds.

- Bikram Keshari Nanda

Dear Bikram,

There really isn't a thumb rule for diversification. Since insurance is not an investment, one has to evaluate the insurance needs on a case-to-case basis.

Regarding the term plan, an annual premium is usually better because it gives you the freedom to let the policy lapse when you think you do not need the cover.

Balanced funds invest in both equity and debt. I usually prefer separate investments in equity (shares) and debt (fixed return investments) funds as compared to balanced funds. Equity and debt are different assets and have different time horizons too (equity should always be invested in from a long-term point of view).

Since you are 27, equity is a good vehicle for you. However, the stock market is at an all time high. So don't invest right away. If you want to, then get started on a Systematic Investment Plan where you put in small amounts every month into a mutual fund.

I discussed value funds above and spoke of the need for investing via a Systematic Investment Plan in my answer above to Valroy. Do read it.