I need guidance on investing in mutual funds (MFs). I am 34 with two kids and am a beginner to MF. I earn Rs.70,000 a month and have expenses of Rs.40,000.
—Mitika Srivastav
The general thumb rule of investing is to be able to invest 20% of your monthly income in a systematic investment plan (SIP). At present, you are able to save more than 40% of your income every month. You should deploy 20% of this into saving to build an emergency fund. You can start off an SIP with about Rs.12,000 a month, which you can increase once you have built a sufficient corpus in your contingency fund account.
You can start with a simple and balanced portfolio of 3-4 funds. For a long-term portfolio of Rs.10,000, you can invest equally (Rs.2,500 each) in four funds—a large-cap oriented fund such as SBI Equity fund, a multi-cap fund like Franklin India Prima Plus fund, a hybrid fund such as HDFC Balanced fund, and a pure debt fund such as UTI Short-term Bond fund. Overall, this would be a 70-30 portfolio with 70% in equity, but the presence of the hybrid fund will give this allocation some flexibility.
