I’m 30 and have started investing in mutual funds (MFs) last year. But I have over-invested; I am hardly left with any savings. What is the ideal ratio of income-to-MF investment? I’m married and earn Rs.60,000 per month. My monthly investments are around Rs.28,000 and expenses are around Rs.23,000.

—Rajyashree Basu

There is no hard and fast rule for this. The most preferred advice is that invest as much money as you can comfortably invest every month in a regular and non-stop manner. Usually, it is about 20% of income or about 50% of regular savings. Applying this to you, we can see that given monthly savings of about Rs.37,000, a monthly investment of about Rs.15,000 would be a fair ask. This would work out to about 25% of your income, which is also good.

Another way to approach this would be to address your concern that you are hardly left with any savings. This can only happen when you do not have a emergency fund. So, you might want to save up about Rs.3 lakh (5 months’ salary) for such a purpose.

What are passive funds? How risky are they?

—Suresh Sinha

Passive funds invest in stocks of a market index by duplicating them in their entirety. Because they are merely duplicating the index without doing an ‘active’ management of the portfolio, they are termed as passive funds. They are mostly available in the form of exchange-traded funds (ETFs) in the market.

When it comes to risk, they can be considered slightly less risky than active or managed funds. This is because the human element, or the ‘fund management risk’ is absent. When you go to a managed fund, the quality of fund management is a variable factor that has to be dealt with.

With passive funds, that variable is absent (since there is no active management), and hence, they can be considered less risky. But these funds also invest in the stock market and the risks inherent in equity investing are definitely there for these funds too. Also, in India, actively managed funds have historically done better than passive funds in terms of performance track record.

How does a systematic investment plan (SIP) work? The money is locked for 3 years in an equity-linked savings scheme (ELSS), but can the funds accumulated in this time be withdrawn or is it every month’s SIP amount that remains invested separately?

—Ashish Banerjee

When you invest using an SIP, every instalment is considered as a separate investment with a separate allotment of units whose investment tenure starts on the date of investment. In the case of ELSS, every unit is locked for three years of the investment tenure starting with its own date of allotment.

So, putting these two facts together, you can gather that every instalment of an ELSS investment is subject to a separate three-year lock-in starting in the month of the instalment.

[“Source-Livemint”]