Investing Rs 10K a month -- How this SIP strategy can be Gen Z’s new wealth playbook

I’m a 21-year-old woman currently in my first job, earning a monthly salary of Rs 32,000. My regular expenses include Rs 8,000 for rent and around Rs 14,000 for lifestyle spending such as dining out, shopping, travel, movies, and credit card bills. This leaves me with the capacity to invest up to Rs 10,000 per month.

In my first month of investing, I started with Rs 7,000 in the HDFC Flexi Cap Fund. Going forward, I plan to invest the full Rs 10,000 each month. I'm not interested in investing in individual stocks, as I prefer not to deal with the volatility and constant tracking they require.

Could you please recommend 2–3 reliable mutual funds that are suitable for long-term, hands-off investing? I'm looking for funds where I can set up SIPs and let them grow quietly over the next few years.

Advice by Rajani Tandale, Senior Vice President, Mutual Fund at 1 Finance

As a 21-year-old earning a monthly salary of Rs 32,000, your expenses amount to Rs 22,000 (Rs 8,000 for rent and Rs 14,000 for other costs), leaving you with Rs 10,000 to invest each month. You’ve already started investing Rs 7,000 in the HDFC Flexi Cap Fund, which is a solid choice for long-term growth. You prefer mutual funds over stocks due to their lower volatility and the reduced need for constant monitoring. You’re looking for 2-3 mutual funds for a "set and forget" strategy with automatic payments (SIPs) for a few years. Given your young age and likely long investment horizon, I’ll recommend funds that balance growth potential with diversification, while keeping risk manageable for your profile.

Step 1: Build a 6-Month Emergency Fund

· Monthly Expenses: Rs 22,000

· 6-Month Emergency Fund: Rs 22,000 × 6 = Rs 1,32,000

· SIP for Emergency Fund: Invest Rs 2,000/month in liquid or arbitrage funds via SIP

· Time to Build: Rs 1,32,000 ÷ Rs 2,000 = 66 months (5.5 years). This starts from May 2025, so the emergency fund will be ready by November 2030

· Remaining Amount: With Rs 2,000 allocated to the emergency fund, you have Rs 8,000/month remaining to invest

Step 2: Secure Personal Health Insurance

· Coverage Needed currently: Rs 5 lakh

· Updated Guidance: You likely have corporate health insurance through your employer, which is common for entry-level jobs. However, corporate insurance is tied to your job. If you switch jobs, you may lose coverage temporarily, leaving you vulnerable. It’s advisable to have personal health insurance as a safety net. A ₹5 lakh individual plan for a 21-year-old typically costs ₹5,000-₹8,000 annually (₹417-₹667 monthly), which fits your budget. Avoid purchasing through brokers and try to buy directly from the company's website

Step 3: Term Insurance (Not Needed)

· Assumption: Since you have no dependents and do not have loans or liabilities, a term insurance plan may not be necessary at this moment

Step 4: Investment Strategy

· Increase SIP in HDFC Flexi Cap Fund: With Rs 8,000 available for investment (after allocating Rs 2,000 for the emergency fund), increase your SIP in the HDFC Flexi Cap Fund (Direct Plan) to Rs 8,000/month starting now (May 2025)

· Why Only HDFC Flexi Cap Fund?

o Avoid Over-Diversification: Adding too many schemes can lead to overlap and doesn’t guarantee better diversification. HDFC Flexi Cap Fund already invests across large, mid, and small-cap stocks, with the fund manager adjusting allocations based on market conditions. There’s no need for separate mid-cap or small-cap funds.

o Direct Plan Preference: Direct plans have lower expense ratios, saving you money over time due to no commission payouts.

· Future Strategy: If your investment capacity increases later (e.g., due to a salary hike), limit your portfolio to one more scheme for simplicity. Consider a passive index fund like UTI Nifty 50 Index Fund (G) - Direct Plan or Motilal Oswal Nifty 500 Index Fund (G) - Direct Plan for broad market exposure at a lower cost.

This strategy keeps your portfolio simple, cost-effective, and aligned with your long-term goals while ensuring financial security.