Planning to start an SIP in India? While you should look closely into the intricacies of Smart SIP returns, market performance and leading funds, you should also be clear on your investment allocation strategy. How much of your monthly income should you allocate as an SIP investment amidst worries pertaining to economic inflation? There are several theories and opinions expressed by industry experts in this regard.
Many feel that you should invest around 20% of monthly income into SIP schemes and other mutual fund plans. This applies, of course, if you can save up to 40% of monthly income or slightly more. You should put half of this or 20% into your savings for building an emergency corpus that remains liquid and ready to use whenever you wish. At the same time, another 20% can go into SIP investment India options. You can start SIPs with amounts as small as Rs. 1,000 every month and scale it up thereafter.
If you wish to diversify your portfolio with different kinds of SIP Funds, then you can pick options like large cap, multi cap, hybrid and pure debt fund choices. You can keep a majority in equity but have fallback options via debt and balanced hybrid funds. Experts keep recommending the 50:30:20 thumb rule. In this case, 50% is spent on expenses and meeting needs while 30% on wants. At the same time, 20% is for building the emergency corpus. First build a corpus which is a minimum of three times of what you take home very month. Post this, investments may be started. An online SIP investment should not exceed 20% of net monthly salary. This is another approach towards scaling up your savings and assets with mutual fund investments. It depends on circumstances, as to the approach that is ultimately adopted or taken by an investor.
More and more people are investing in mutual funds since they offer high flexibility and you can invest smaller sums on a periodic basis. Mutual funds also ensure higher returns that can comfortably surpass inflation as well. Inflation should be factored in at all times while you are deploying investments into mutual funds. These funds will help you retain the actual worth of investments by beating inflation comfortably. Investments in SIPs and mutual fund plans will help you secure your financial future without any worries down the line. The best utilization of funds will only take place when you remain invested in equities for at least 5-7 years or even higher. This will enable you to benefit through the sheer power of compounding above all else. This will give you excellent long-term returns which may also go beyond 15-18% whenever markets pick up and start doing better than before. The 50:30:20 rule is more appropriate and convenient for investors according to industry and mutual fund experts. If you can save more than 40% then you can split savings and investments into the 20:20 ratio. In fact, mutual funds are the sole investment option which will not erode in value over the long haul, something that counts immensely in today’s times.
Hence, in inflationary and fluctuating scenarios, you should avoid cashing out on investments made. Make it a point to stay invested and reap the benefits of your discipline and financial prudence in the near future. Make sure that all your emergency corpus, expenditure and other payment needs are also met without compromising on them for investments. Long-term equity investments aside, if you are looking for short-term gains, invest in suitable funds with higher risks, if you have the appetite and the circumstances. Take the advice of a financial planner or expert in this regard.