How Much of Your Salary Should You Invest in Mutual Funds?

Introduction

If you’re earning a salary and thinking of putting part of it into mutual funds, you’re asking the right question: “How much should I invest?” It’s one of the most common dilemmas for people new to investing. Invest too little, and you may not reach your goals. Invest too much, and your everyday finances might get strained.

In India, where the cost of living, inflation, and job security vary greatly, figuring out the “right” number is especially important. This blog walks you through how to determine a sensible percentage of your salary to invest in mutual funds, taking into account your income, expenses, goals, risk appetite, and financial commitments.

Why figuring out matters

Investing isn’t just about choosing the right mutual fund, it’s also about making sure that whatever you invest doesn’t hurt your day-to-day life. A well-planned allocation keeps you comfortable, disciplined and consistent. Experts often point out that what matters is not timing the market, but time in the market, and that means starting with a sustainable investment amount and increasing it over time.

What the experts say – typical rules of thumb

Different financial advisors and platforms use slightly different rules of thumb. Here are some widely referenced ones in India:

20% Rule

Platforms like Bajaj Finserv suggest starting by aiming to invest about 20% of your income into savings and investments, much of which can go into mutual funds once other priorities are met.

50-30-20 Budgeting Framework

Another popular framework:

• 50% of salary → Essentials (rent, food, bills)
• 30% → Wants (lifestyle, travel)
• 20% → Savings and investments

Within that 20%, you can allocate a part to mutual funds depending on your goals and risk profile.

Salary-based breakdown

A more nuanced model breaks it down by salary range:

• If monthly salary ₹30,000–₹50,000 ⇒ invest ~10–15% in mutual funds.
• If monthly salary ₹50,000–₹1 Lakh ⇒ invest ~15–25%.
• If ₹1 Lakh+ per month ⇒ you may go 25%–40%+ depending on liabilities.

These are rough guides, not strict rules, they help you frame the investment conversation.

Factors you should consider before finalising your number

Before you pick a percentage, here are key personal factors to account for:

A. Emergency corpus and debt burden

If you still don’t have 3–6 months of living expenses in a liquid emergency fund, or you are servicing high-interest debt (credit cards, personal loans), your immediate priority should be these. Many experts recommend clearing high-cost debt before making large investments.

B. Your financial goals & horizon

What are you investing for? A house in 5 years? Retirement in 25 years? Each goal has a different investment horizon and risk-profile. The longer the horizon the more risk you can take, and the higher share of salary you could allocate to equity mutual funds.

C. Risk tolerance and portfolio composition

Mutual funds come in debt funds, hybrid funds, or equity funds, each with different risk levels. If you’re comfortable with volatility and have a long time horizon, you may allocate more to equity funds and invest a higher percentage.

D. Current expenses & future liabilities

Your fixed obligations (home loan EMIs, education fees, dependents) reduce the portion of salary you can safely invest. The Fixed Obligations to Income Ratio (FOIR) approach helps you see how much free income remains post-obligations.

E. Salary growth and escalation

As your salary grows, your capacity to invest should grow. Many financial planners recommend increasing your investment amount (or percentage) whenever your salary rises, rather than letting the investment percentage remain stagnant.

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How to decide how much,  a step-by-step process

Here’s a practical approach you can follow:

Step 1: Track your income & expenses

Start with your net salary (after tax). List your monthly or annual expenses: essentials, wants, debt servicing, savings for other things.

Step 2: Build your emergency fund

Ensure you have 3–6 months’ worth of expenses in a liquid form (bank savings, liquid fund). If not, allocate a part of your savings budget towards that first.

Step 3: Use the 50-30-20 rule as a guideline

Apply the 50-30-20 rule: you might allocate 20% of your salary to savings & investments. Example: If your monthly salary is ₹60,000, then ~₹12,000 becomes your “investment and savings” pool.

Step 4: Determine how much of that pool goes into mutual funds

Within that 20% bucket, decide the proportion for mutual funds. Some may choose half, others more, depending on goals and risk. For instance if the “investment pool” is ₹12,000, you may allocate ₹8,000 (≈13% of salary) to mutual fund SIPs and the remaining to retirement funds, gold or debt instruments.

Step 5: Adjust based on your salary range & goals

For salaried individuals:

• If salary ₹30K–₹50K/month → starting SIP of ~10–15% is reasonable.
• If ₹50K–₹1 Lakh/month → 15–25% may be reasonable.
• If ₹1 Lakh+ → you may target 25%+ if financial obligations are under control.

Step 6: Review and increase consistently

As your salary, responsibilities and goals evolve, review your investment amount annually. If you get a raise, consider increasing your SIP amount or percentage. Don’t let your investment remain fixed while salary grows.

What kinds of mutual funds should you invest in?

Choosing the type of fund matters too. Here’s how your salary-allocation decision ties into fund type:

• Debt funds / conservative funds – Lower risk, suitable for short-term goals or when you prefer more stability.
• Hybrid funds – Mix of equity & debt, moderate risk and moderate returns; useful if you prefer balanced exposure.
• Equity funds/large-cap, mid-cap, thematic – Higher risk, higher potential return; suitable if you have long horizon and strong risk tolerance.
  

For example, in a ₹12,000 investment pool, you may deploy 60% (₹7,200) into equity funds and 40% (₹4,800) into hybrid or debt funds, depending on the goal distribution.

Common mistakes salaried investors make

Many working professionals make these avoidable errors:

• Investing without a clear goal → Leads to panic selling in downturns.
• Ignoring emergency fund → Postpones investment until a crisis hits.
• Over-allocating early on → Sacrifices lifestyle or increases stress.
• Under-reviewing portfolio → Your allocation and goals drift apart over time.
• Chasing returns rather than discipline → Leads to inconsistent SIPs or market timing.
  

How Entri’s Courses Can Help You Invest Intelligently

If you want not just how much but how to invest, educational courses are powerful.

• The Entri Stock Market Course teaches you market fundamentals, investing strategies and how to interpret mutual fund returns versus alternatives.
  
• The Entri Mutual Fund Course focuses specifically on mutual funds: types of funds, how to select them, how SIPs work, and how to align them with your salary and goals.
  

These courses help you move beyond rough rules (like “invest 20%”) to data-driven, goal-linked investing, making your salary investment count rather than guesswork.

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Real-life example: Putting it into practice

Let’s assume your salary is ₹60,000/month. Using the above approach:

• 50% on essentials = ₹30,000
• 30% on wants = ₹18,000
• 20% savings/investments = ₹12,000
  

From the ₹12,000:

• Emergency savings (if not built yet) = ₹4,000
• Mutual fund SIP = ₹7,000 (~11.7% of your salary)
• Other investments (PPF, gold etc.) = ₹1,000
  

If you increase your salary next year to ₹70,000 and keep the 11.7% ratio, you’ll invest ~₹8,190 monthly in mutual funds. This consistent upward approach keeps you disciplined and improves wealth-creation over time.

Key Takeaways

• A good starting point: 10–20% of salary for mutual funds, depending on your financial situation and goals.
• Use budgeting frameworks (50-30-20) and salary-based breakdowns to decide a comfortable allocation.
  
• First priority: emergency fund + debt clearance. Only then, escalate mutual fund investments.
  
• Choose fund types aligned with your horizon and risk appetite.
  
• Increase your investment amount as your salary grows; don’t let inflation or lifestyle creep “steal” your future wealth.
  
• Structured learning (Entri’s courses) helps turn good intentions into informed, consistent investing.
  

Conclusion

There’s no perfect “one-size-fits-all” percentage of salary to invest in mutual funds, but using a framework combined with personal financial assessment will guide you to a number that works. Start small if you must, stay consistent, keep reviewing, and let your investment grow as you do.

By combining discipline (regular investment) with education (Entri’s Courses), you’ll give your salary the power to build real financial progress, not just hope for it.