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Public Provident Fund (PPF) - an Exempt-Exempt-Exempt (EEE) investment tool, I invest max possible in 80c i.e. 1.5 Lakh at the rate of 7.6% per year with a lock in of 15 years. (I would like to extend it to 20 years before withdrawal). Complete debt based instrument.

National Pension Scheme: Tier 1 (NPS) - also an EEE investment tool, an amount of equal to PPF per year is invested. NPS is similar to a mutual fund company which has a lock-in period of 37 years (until retirement). [80% debt funds & govt. bonds and 20% equities]. The half of the above amount is contributed by the employer.

Mutual Funds - No tax rebate/exemption, I invest 5% of salary per month. The mutual funds are extremely aggressive, Large and Mid Cap funds.

Savings Bank Account - No tax rebate/exemption, I put 15% of salary per month. For some liquidity in case of emergencies etc.

My medical is completely covered by the employer and I'm at no risk of losing job (forever unless, I choose to resign).


Since, I'm young, should I change my NPS allocation to let's say around 50% debt and 50% equities for next ten years or so? or should I let it be the same.

Should I diversify my tax saving instruments? Like 50% PPF and the other 50% ELSS (tax saving mutual funds {balanced funds} with lock-in of 3 years). The only issue here is that the other tax saving instruments don't have EEE policy. They are generally taxable at withdrawal. Only PPF is EEE. There is National Savings Certificate offered by Post Office of India.

How important is Life Insurance? How much of my income should I invest, if at all?

I don't have enough corpus to invest in any form of real-estate, is it wise to take a loan this early, especially when I have education plan (not very expensive) in the future?

Most of my savings are in low-risk category, how much should I diversify towards high-risk investments?

My final objective is to create a corpus fund and reduce dependence on salary.

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How important is Life Insurance? How much of my income should I invest, if at all?

Life insurance is important. It should be for an amount that will replace your income for your dependent. There are quite a few questions on this site, please browse through.

At your age you should opt for max equity offered at NPS, currently at 50%.

PPF and ELSS are both good choice and a question of preference. The other advantage of PPF is it can't be attached by court. In case you are heavily in debt due to unforeseen reason, everything you have can be attached and sold except PPF.

  • Is there a chance that, I'll lose my NPS because of that? – Tarun Maganti Jun 7 at 17:28
  • @TarunMaganti In theory yes you could lose money, or more correctly the corpus can go down slightly, however the investment is in index funds that are low risk. Historically NPS has given good returns. – Dheer Jun 8 at 1:58
  • Even if I put the NPS at most possible equity of 50%? What is the time, I should change it. – Tarun Maganti Jun 10 at 9:12
  • Could you also answer how to diversity my investments? – Tarun Maganti Jun 10 at 9:13

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