There are many things you can do when your salary gets credited to your account. You can either splurge mindlessly or invest judiciously to secure a future for yourself. It is not true that you cannot enjoy your life while continuing your investments. It is all about finding the right balance.
There are a few investment decisions you should definitely make with your salary: regular monthly investments, investing in mutual funds, setting up an emergency fund and setting some aside for short term expenses as well.
Here are five best investment plans for salaried persons in India that you can incorporate to make the best optimum use of your salary in detail.
Build your emergency fund: The emergency fund is supposed to be a corpus that you collect to use in cases of emergency only. The emergency being referred to in this case is a loss of a job or regular salary. This fund should have at least six to nine months of your monthly expenses. You can imagine that this fund's total value is huge and will be dynamic with changing salaries. Hence, you should start building your emergency fund from the first salary itself. Even if it is a few hundred per month. Even some of the best investment strategies for salaried persons will ask you to build an emergency fund first.
How can you build it? Because of the nature and purpose of an emergency fund, many prefer keeping it in debt funds or fixed deposits yielding the best FD rates in the market. You can pick any safe instrument from the market that suits your investment profile.
Use SIPs for Regular Investments:
If you are new to investments and are having trouble allocating money for investment, it will be good to start investing in Systematic Investment Plans (SIPs). With the help of SIPs, you can instill the habit of regular investing and start with as low as Rs 500. Once you see the benefits of equity funds and how it helps money grow, you will automatically increase the allocation. SIPs is not just for newbies. Even experienced professionals and investors can opt for a SIP mode as a habit of monthly investment is not the only take away from SIPs. When the markets are down and the NAVs of mutual funds are falling, your SIP starts collecting more numbers of units which ultimately helps you during redemption.
This is how it works in SIPs:
If you invest Rs 1,000 per month and the NAV is Rs 50, the number of units getting credited to your SIP account will be (1000/50)= 20 units. Naturally, if the NAV falls the number of units getting credited increases.
This is also called rupee cost averaging. SIPs are a few of the best available investment options for salaried persons in India.
Even if you are new to mutual funds, direct mutual fund platforms like Groww make it very easy for novice investors to understand mutual funds. They have SIPs and lump sum investment options on their platform. With a user friendly platform and a lot of useful educational material, Groww has made it really easy for the Indian investors to increase their exposure towards direct funds.
Invest in Mutual funds: This is the next best thing you can do with your salary. Mutual funds are investment instruments that hold their funds in equities or bonds(equity/debt funds) or a combination of both (hybrid funds) and are one of the best investment options for salaried persons in India. Many of us do not want to take the risk of investing in stocks directly. Mutual funds give us a good opportunity to get high returns and not take the pain of stock market research. It is better you choose direct mutual funds because their expense ratio is much lesser as there is no advisor or intermediary involved. You can take a couple of months to gather some lump sum money and pick a fund that suits you.
Plan for your retirement: Setting aside money for retirement is also extremely essential. If you are a regular salaried professional and you have not saved enough, after retirement you will land yourself in a soup with less money and no regular income coming in. It is ideal to start saving for retirement from the very beginning. If you think you have a lot of time at hand, you are wrong. Imagine not receiving your salary for two months with no other sources of income and no one to support either! That is exactly what retirement is like.
Pension funds, public provident funds are the most popular tools and some of the best investment options for salaried persons in India however equity funds can also serve as a long term instrument and in fact perform better than the fixed interest rate investments.
Short term expenses:
You can also use liquid funds and ultra short term funds from the debt mutual fund category for short term expenses. These short term expenses can arise within the same year. Rather than keeping your money in a savings bank account, you can keep it in a higher interest yielding instrument.
In conclusion, I would like to say that you should begin investing in your first salary and you should invest in every monthly salary you receive. Salaried persons do not have benefits like business persons and will face a gap of income after retirement age comes up. Once you start investing you realise the benefits of sustained and prolonged investment. Ideally, you should be able to invest at least 15% of your salary every month. If this is too much for you and you are new, begin with as much as it is possible. It is not important to start big, it is important to start early even though it is low.