What Percentage Of Your Money Should You Invest In Mutual Funds?

You now know how important it is to invest in Mutual Funds. You're sure that Mutual Fund is an excellent way to put your money to work. And you've decided to put your money into mutual funds so you can get all of their benefits. But the next question is the amount you should invest monthly in Mutual Funds.

Many people don't know how much they should put into Mutual Funds. We don't have a magic number to clear this up, which is a shame. Because each investor is distinct, their needs and income levels are also different. So, most people cannot invest the best amount of money.

But luckily, there is a way to figure out how much money should be put into Mutual Funds. In this blog, we'll talk about how to do this. And explain the things that will help you figure out how much you should put into mutual funds.

Set your goals

You should have a list of things you'd like to do in the future. You want to do these things as soon as you have enough money. For example, buying the newest iPhone, a new car, a house, going on a trip, saving for retirement, etc. These things visitors want to do when they have enough money are called financial goals in the language of personal finance.

To figure out how much you should invest, you need to know your financial goals. So, the first step is determining your financial goals and when you want to reach each one. When setting goals, you must be SMART about them. For example, the goal of being successful in life is unclear.

But an instance of a SMART goal is a plan to save Rs. 3 crores by 2050 to pay for your retirement. Another SMART goal is to save Rs. 20 lacks by 2030, so your child can attend college. Writing them down is a simple method for determining if they are SMART goals.

To make things even easier, you can put them into three groups: short-term, medium-term, and long-term. Short-term goals are ones you want to reach in a year or less. The goals you want to reach in 3 to 5 years are medium-term. And long-term goals are ones you want to reach in at least 10 years.

Prioritize Goals

The next step is to make sure that your goals are possible. You might want to do many things, but depending on how much money you make, you might not be able to do them all. So, the key is to figure out how important your goals are.

For example, you should pay off a personal loan early instead of going abroad. In the same way, retirement and children's education could be the most important long-term goals in 15 to 20 years. So, these goals should be more important than anything else.

Calculate the Investment Amount

Once you've decided which of your goals are most important and when you want to reach them, you're one step closer to figuring out how much you need to put into Mutual Funds every month. All you have to do is figure out how much each of your goals will charge you in the future. And the budget, which is the same as your monthly salary.

When making a budget, it's always best to invest first and spend what's left over. Investing initially and then spending what's left will help you keep track of your money and avoid spending money you don't need to. Since you wouldn't have much money to spend, you would automatically figure out how much you make and how much you spend each month and stop spending more than you need to.

For example, let's say that your income is Rs. Let's say you want to buy a car in 4 years, pay for your child's college education in 15 years, and retire in 30 years. How would you decide what to do first? Here are some ways to plan. You can invest in Equity Mutual Funds for long-term goals like your child's college education or retirement, assuming they will give you a 12% average annual return over the long term.

Thinking about a slightly lower return for your mid-term goal is better. This is because, in the medium term, it wouldn't be smart to put all of your money into Equity Funds. So, if you expect an average annual return of 9%, you should put your money into Hybrid Funds. As the table shows, you must spend Rs. 22,000 to reach your most important goals.

Set this amount aside to invest by starting a SIP, and use the remaining Rs. 38,000 to pay your monthly bills. You can also add more money to your investments as you move up in your career and make more money. This will enable you to accomplish these targeted goals and work on some other ones simultaneously.

Conclusion

There is no wrong or right answer regarding how much you should put into mutual funds every month. How much you invest should depend on your financial goals and how much time you have to reach them. Find your goals, put them in order of importance, and figure out how much you'll have to invest each month to reach them. Putting money into investments initially and then spending what's left will help greatly.