As a mutual fund advisory in Mumbai, we have noticed an upward trend in young professionals who are keen to start their investment journeys. Mutual funds, while they seem daunting when one starts off, it becomes easier with a mutual fund advisor by one’s side. Let’s dive into the challenges and the details of how to go about investing, starting from the first salary itself!
The income that we earn is typically used in three areas:
Day-to-day expenditure
Keeping money aside for an emergency fund
Invest for long term goals like, owning a house, buying a car
Fairly, this is just an extended bifurcation of what one knows as ‘savings’ and ‘expenditure’, in basic economics. But this helps us understand what percentage of our salary should be spent, on average. Typically, about 20-30% of one’s monthly income goes towards their savings. A simple formula to check how much money you should be putting to investments is by determining what are the costs you must absolutely bear. Let’s look at something that mutual funds advisors like to call ‘FOIR’.
FOIR
FOIR or Fixed Obligations to Income Ratio helps us determine what part of one’s salary goes into meeting their basic needs for sustaining their life. Let’s understand this better with an example. Let’s assume Karan earns RS. 60,000 per month. His monthly expenses look something like this,
Rent: Rs.12,000
Food: Rs. 5,000
Conveyance: Rs. 3,000
Electricity Bill: Rs. 2,000
Leisure: Rs. 4,000
Other Bills and Misc. expenses: Rs. 4,000
The total of this, i.e., Rs. 30,000 is the FOIR for Karan. When we take out his FOIR from his income, we are left with an amount that he can use to invest in mutual funds. In this case, that would come down to,
Total income - FOIR = Portion of salary for investment
Rs. 60,000 - Rs. 30,000 = Rs. 30,000
Karan, with this amount, would seek for investment advisory services to understand how to go about it in a better way. The first thing would be to ensure that he doesn’t spend the entire Rs. 30,000 and in fact, keeps some portion of it aside for emergencies as a precautionary step.
Now that we have determined how many portions of one’s salary can be used for investments, let’s now look at why mutual funds are a good option for it.
Also Read: Mutual Funds: Why Long Run Matters?
Why Mutual Funds?
While mutual funds seem a little confusing and daunting at first, a good mutual fund advisory comes to benefit to handle the details of the process. But before we get into that, here is why a first-time investor can go for mutual funds over other kinds of investments,
Mutual funds can be initiated into a diverse portfolio by even a low initial investment. It can be done by investing as little as Rs. 500 or Rs. 1,000 a month in the beginning. The other great part about it is that one can invest it as a lump sum or as a Systematic Investment Plan or SIP, as it is known commonly. With SIPs, when done with the right guidance, can yield great results while it also reduces the overall cost of investment.
Mutual fund investment is a pretty simple process and it is paperless too! One can simply have a look at the market, and make their investments as per their requirements after it. The best way is to get in touch with a mutual fund advisory service. Since you would be just starting off with your investment portfolio, a mutual funds advisor would be able to give you a better insight into the market and where to invest as per your personal goal and budget.
You can actually save tax when you invest in mutual funds! Section 80C of the Indian constitution provides tax deductions on certain financial instruments and mutual funds come under it!
When you get mutual funds advisory service, an advisor will be appointed to you, who will look after your portfolio. They are backed by a team of researchers. With your goal being clearly understood by them, they execute a detailed investment strategy to grow your assets manifold. They also understand the market, where it is potent to invest in, and what should be avoided, given your budget and goals.
I hope this article gives you a clear understanding of how to go about investing with even your first job! We would be more than happy to help with any other queries you have. Just mail to us
helpdesk@ajmera.co.in
Also Read: The SMART Approach For Mutual Fund Investing!