Systematic Investment Plans (SIPs) are an ideal way to build long-term wealth. Through the power of compounding and rupee cost averaging, SIPs help investors benefit from capital market exposure without needing to time the market.
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Even small contributions in SIPs can go a long way in creating wealth. Still, salaried persons can feel confused about where to start. There is no one-size-fits-all percentage for SIPs, but over the years, investors have accepted certain baseline frameworks for allocation towards investments.
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Typically, many investors follow the popular 50-30-20 rule for their monthly budgeting. This means that 50% of their pay goes towards needs, 30% towards wants and remaining towards savings and investments. Going by this rule, someone with a take-home-pay of Rs 40,000 should be investing around Rs 8,000 for their savings and investments.
The exact allocation of these Rs 8,000 towards assets can depend on the investor’s risk appetite and goals. One should also put some of their money towards an emergency fund.
|
Monthly Rs 8,000 |
SIP |
Emergency Fund |
|
Conservative |
Rs 2,000 (25%) |
Rs 6,000 (75%) |
|
Balanced |
Rs 4,000 (50%) |
Rs 4,000 (50%) |
|
Investment-focused |
Rs 6,000 (75%) |
Rs 2,000 (25%) |
To be clear, this is an illustrative suggestion. In early career, lower take-home pay can force investors to save limited money due to cost of living, expenses, etc. In such cases, one can try to save at least 10-15% of their pay for investment purposes.
SIP When Salary Is Rs 60,000
Going by 50-30-20 rule, money towards investments can ideally be: Rs 12,000
|
Monthly Rs 12,000 |
SIP |
Emergency Fund |
Debt Savings |
|
Conservative |
Rs 2,000 (17%) |
Rs 6,000 (50%) |
Rs 4,000 (33%) |
|
Balanced |
Rs 4,000 (33%) |
Rs 4,000 (33%) |
Rs 4,000 (33%) |
|
Investment- focused |
Rs 6,000 (50%) |
Rs 3,000 (25%) |
Rs 3,000 (25%) |
SIP When Salary Is Rs 1 lakh:
Going by the 50-30-20 rule, the savings allocation should be a minimum of Rs 20,000. But if you can save more, you will be able to accelerate your wealth creation journey.
|
Monthly Rs 20,000 |
SIP |
Emergency Fund |
Debt Savings |
|
Conservative |
Rs 3,000 (15%) |
Rs 10,000 (50%) |
Rs 7,000 (35%) |
|
Balanced |
Rs 7,000 (35%) |
Rs 7,000 (35%) |
Rs 6,000 (30%) |
|
Investment- focused |
Rs 10,000 (50%) |
Rs 5,000 (25%) |
Rs 5,000 (25%) |
These figures are illustrative and are not intended as financial advice. The right split can change based on your emergency savings, loans, monthly expenses and financial goals. As these factors change, the allocation may need to change too. This is why it is recommended to consult an expert before making long-term financial commitments.
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