Periodic saving pays

Mr Gajendra Nagpal, founder and Chief Executive Officer, Unicon Financial Intermediaries, talks to Business Line on what young people should watch out for, while investing. Prior to founding Unicon, Mr Nagpal held senior positions at the regional and national levels with Kotak Securities and Indiabulls.


From your experience, what precautions should young people take with regard to their savings or investments?
Investments don’t give returns overnight. Youngsters should avoid taking bigger bets than they can actually afford. This basically means that they need to understand their financial goals depending on their cash flows, expenditure and liabilities.

One should avoid investing in non-productive assets. Lack of planning can be lethal.

Many of us may not have the social security benefits or the pension cover that our parents had. How soon should young people plan for retirement and what is the best way to do that?

Investing for retirement starts from the very first day you start earning. Investment strategies must be co-related with the retirement plans.

Correct portfolio allocation is the most important tool for retirement plans. The young can opt for risky asset classes to maximise their yields but the risk factor associated with the portfolio should constantly decrease with the increasing age. The best way to determine the portfolio allocation is to subtract your age from 100 which ideally should be the percentage of the risky assets in your portfolio. It’s important to be cognizant of future cash outflows.

In case you don’t have an employer-sponsored retirement plan, you can commit a small amount every month towards retirement plans. I would recommend young investors to take endowment plan as life cover instead of term plan as dependency on individual income increases with age.

What’s the quickest way to make your first million in investing?

Consistent asset mix is very critical; investing in stock market, real estate with your long-term money and letting it grow can help you earn your first million. The most difficult part is getting started. Hence, start investing from whatever you save after monthly expenditure.

Invest in stocks and funds with solid fundamentals and let compounding work (investing profits back) its magic for you.

The stock markets may offer high returns; but the past year clearly tells us that direct investment requires almost constant monitoring and churning of your portfolio. What other routes would you recommend to investors wanting to participate in stocks?

Investing directly in the stock market should be part of your financial goals which means that you should define your risk and reward before investing in any equity instrument.

Invest in stocks backed by fundamental research and avoid following the ‘grapevine’ method.Portfolio diversification is must to maximise the yields and to manage the risk associated with the investments. Individual investors should avoid leveraging or depending on borrowed money for investing. When it’s difficult for you to track investments due to work commitments, one can invest in good mutual funds.

How should young people plan for today’s realities of job losses and pay cuts, while making investments? Creating a budget is a way of taking control — it can help you get a realistic picture of your financial situation and give you the facts you need to begin making the emotional choices associated with money. They need to understand that small savings every month are very crucial and can act as a bail out package in hostile economic environment.

What are the safe investment options in which young investors can park their money and how do their returns compare?

Employees’ Provident Fund; Public Provident Fund (PPF); Life insurance policy (including ULIP and pension plan); National Savings Certificate (NSC) and bank fixed deposits (FDs).