The amount alone tells us very little<\/strong><\/p>\nSuppose I tell you: \u201cI drive 50 kilometres every day. Is that enough?\u201d<\/p>\n
You cannot answer unless you know where I am trying to go and when I need to reach there.<\/p>\n
If the destination is nearby, it may be more than enough. If it is 1,000 kilometres away and I need to reach tomorrow, clearly it is not.<\/p>\n
Investing works much the same way.<\/p>\n
\u20b950,000 a month may be enough for one person and nowhere near enough for another. It depends on the goals you are trying to fund, how much those goals may require, when the money will be needed and how much you have already accumulated.<\/p>\n
That is why these two statements are not the same: \u201cI am investing regularly\u201d <\/strong>and \u201cI am on track for my goals.\u201d<\/strong><\/p>\nYou can invest diligently for years and still discover later that the amount was not enough.<\/p>\n
There is no magic SIP amount<\/strong><\/p>\nNaturally, investors look for a rule.<\/p>\n
\u201cHow much of my salary should I invest?\u201d<\/p>\n
\u201cIs 20% enough?\u201d<\/p>\n
\u201cShould I increase my SIP by 10% every year?\u201d<\/p>\n
Such numbers can be useful as broad assumptions or starting points. But they should not become financial rules that we follow mechanically.<\/p>\n
There is no universal minimum or maximum investment amount.<\/p>\n
Two people earning the same income may need to invest very different amounts. One may already have substantial investments and many years available. Another may have started later or have larger financial commitments.<\/p>\n
So the right amount cannot come from a standard percentage. It has to come from your goals, your present financial position and the time available to you.<\/strong><\/p>\nThere is no compulsory 10% step-up either<\/strong><\/p>\nThe same applies to increasing investments every year.<\/p>\n
A 10% annual SIP increase is commonly used in financial projections. But that does not mean everyone should increase investments by exactly 10%.<\/p>\n
If your income rises substantially and you can comfortably increase your investments by 20%, 25% or 30%, why stop at 10% simply because a calculator assumes it?<\/p>\n
And there may be another year when even a 10% increase is not practical.<\/p>\n
A 10% SIP step-up is an assumption. It is not a financial rule.<\/strong><\/p>\nOnce normal expenses, near-term requirements and necessary liquidity are taken care of, invest the genuine surplus available to you. If your ability to invest increases, increase your investments.<\/p>\n
Meeting your goals should not become a ceiling<\/strong><\/p>\nSuppose your financial plan indicates that a certain monthly investment should reasonably put your important goals on track.<\/p>\n
Does that mean you should stop investing anything beyond that amount? Not necessarily.<\/p>\n
Meeting financial goals is important, but it need not be the end of the journey.<\/strong><\/p>\nIf you have additional genuine surplus, that money can continue working for you. Over time, it can build wealth, create a larger financial cushion and give you more choices later in life.<\/p>\n
So the amount required for your goals may tell you what is needed for the plan.<\/p>\n
It should not automatically become the maximum you are willing to invest.<\/strong><\/p>\nThis is why rigid rules such as \u201cI already invest 20% of my income, so I am saving enough\u201d can be misleading.<\/p>\n
But what if you are already investing as much as you can?<\/strong><\/p>\nNow consider the opposite situation.<\/p>\n
You are already investing the genuine surplus available to you, but the amount may still not be enough for your goals. It means there is a gap that needs to be recognised.<\/p>\n
Over time, you may be able to close it by investing more as your income rises, giving the goal more time or adjusting some expectations.<\/p>\n
Start with the purpose, not the product<\/strong><\/p>\nThis connects with a theme running through my earlier articles.<\/p>\n
In \u201cShould You Invest in an International Fund? Try This Test First\u201d, the question was whether an investment had a purpose in the portfolio.<\/p>\n
In \u201cYou Don\u2019t Drive an Entire Journey in One Gear. Then Why Invest That Way?\u201d, I discussed why money needed at different stages of our financial journey should not all be invested in the same way.<\/p>\n
The same principle applies here.<\/p>\n
Before asking which mutual fund should receive the next SIP, first ask whether the amount being invested is enough for what you are trying to achieve. The product comes later.<\/strong><\/p>\nOne final thought<\/strong><\/p>\nThere is no universal answer to how much we should invest. \u20b920,000 may be enough for one person\u2019s goals and \u20b92 lakh may not be enough for another\u2019s.<\/p>\n
What matters first is whether what you are investing is reasonably putting your important financial goals on track.<\/p>\n
If it is not, recognise the gap rather than make it disappear with a higher return assumption.<\/p>\n
And if your goals are comfortably on track and you can invest more, don\u2019t let an arbitrary savings percentage become a stopping point. Let that additional money continue working for you and building wealth.<\/p>\n
So instead of asking: \u201cAm I investing a good amount?\u201d<\/strong><\/p>\nask: \u201cIs what I am investing enough for my goals?\u201d<\/strong><\/p>\nAnd once the answer is yes, let whatever more you can invest continue working for your future and create wealth for you.<\/p>\n
Mahesh Kumar K is a SEBI Registered Investment Adviser and Principal Adviser at ClearPath Wealth. He is a member of Fee-only India. This article is for general education and does not constitute personalised investment advice.<\/p>\n
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