I’m 35 and earn Rs 2 lakh a month. How much and in which mutual fund schemes should I invest?

One of the topics that appealed to me was investing in mutual funds through SIPs. I am 35 and my monthly gross income is Rs 2 lakh. Please advise me on what kind of schemes I should start investing in through SIPs and how much.  

Atul Tandon 

By Rajiv Bajaj, Chairman and MD, BajajCapital 

Given that you are only 35 years old and earn a monthly gross income of Rs 2 lakh, you have a substantial opportunity to grow your wealth through disciplined investing in the right mutual fund schemes. 

To secure your financial future, it’s recommended that you aim to save about 30 per cent of your monthly income, which in your case amounts to Rs 60,000. These savings will play a crucial role in achieving your financial goals. 

Let’s factor in your age. There’s a useful formula that suggests you invest a percentage equal to a hundred minus your age in a carefully selected portfolio of Equity Mutual Fund SIPs. That would be 65 per cent (100-35) of your monthly savings, which translates to Rs 39,000 per month (65 per cent of Rs 60,000). 

Here’s the next step: You should divide this monthly investment of Rs 39,000 into five SIPs of Rs 7,800 each. It’s like diversifying your investment portfolio for better stability and returns. 

• For the first two SIPs, consider Large Cap Funds like SBI Blue Chip Fund and Nippon India Large Cap Fund. These tend to be less risky and can provide stable returns. 
• The third SIP should be in a Mid Cap Fund like the HDFC Mid Cap Opportunities Fund. Mid-cap funds have the potential for higher growth. 
• For the fourth SIP, opt for a Flexi Cap Fund like Kotak Flexi Cap Fund. These funds provide flexibility to invest in different market segments, which can be advantageous. 
• Lastly, your fifth SIP can be more thematic. Depending on your risk appetite and investment goals, you can explore options like a Small Cap Fund or a Value Fund. 

Besides, understanding your financial goals is key when choosing mutual fund schemes. If you aim for long-term goals such as retirement, buying a house or child's education, Equity mutual funds would be a great investment option considering your current age and risk appetite. These funds invest in equity shares of companies and have the potential to deliver high returns over a long investment period, especially for investors in their early or mid-career like you.

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By commencing investments via SIPs in equity funds, you can reap the benefits of power of compounding, rupee-cost averaging and also alleviate risks associated with timing the market. Risk is spread across over a period due to incremental investing, thereby reducing the impact of market volatility. Further, investing a small, fixed amount regularly makes it a budget-friendly method, creating a habit of saving.

If you are risk-averse, or have short term financial goals, Debt Funds can be a good option. They invest in fixed-income instruments like corporate bonds, government securities, treasury bills, etc. and offer low to moderate returns but with lower risk when compared to equity funds. 

Important piece of advice: Always read the offer documents carefully before investing in Mutual Fund SIPs. It’s essential to understand where your money is going. It is crucial to choose fund schemes carefully based on your individual financial goals, risk appetite and investment horizon. Lastly, despite all research and planning, keeping in touch with a financial advisor for personalized advice taking your specific circumstances into consideration would be beneficial.

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 (Views expressed by the investment expert are his/her own. E-mail us your investment queries at askmoneytoday@intoday.com. We will get your queries answered by our panel of experts.)