Money and amounts
Questions about rupees. Most of these have shorter answers than people expect.
How much money do I need to start investing?
A monthly SIP into a mutual fund can start from around Rs 500, and many shares cost a few hundred rupees. The amount matters far less than the order of operations: emergency savings first, then clearing high interest debt, then investing money you will not need for at least five years.
How much of my income should I invest?
There is no correct percentage. Work out what you can invest consistently without needing to withdraw it, since consistency matters more than the amount. A common approach is to invest whatever remains after expenses and savings goals, and to increase it with every raise before lifestyle absorbs it.
How much emergency fund do I need?
Three to six months of living expenses for most salaried people, and nine to twelve months if you are self employed or your income is variable. Calculate it on what you need to live each month, not on what you earn.
What charges do I pay when buying shares?
Brokerage, securities transaction tax, exchange transaction charges, GST at 18% on brokerage and transaction charges, a SEBI turnover fee, and stamp duty on the buy side. Selling from your demat account also incurs a depository charge, levied per company per day.
Is zero brokerage really free?
No. Brokerage is only one of several charges and is often the smallest. Securities transaction tax, exchange charges, GST, stamp duty and depository charges still apply, and a broker offering zero brokerage may recover cost through account maintenance fees.
What is an expense ratio and why does it matter?
It is the yearly fee a fund charges, deducted from the fund daily rather than billed to you. It matters because it is certain while returns are not, and it applies to your whole balance every year. Over decades, a fund charging 1.8% instead of 0.2% consumes a large share of your final amount.
Should I invest a lump sum or monthly?
A monthly SIP removes the need to judge the right moment and buys more units when prices fall. If you have a lump sum you do not need for years, investing it gradually over several months is a common compromise between waiting and committing everything at one price.
Is a Rs 20 share cheaper than a Rs 2,000 share?
No. The price depends entirely on how many shares the company has divided itself into, so it says nothing about value. What matters is the price relative to what the business earns and owns.
How much should I keep in one company?
A common discipline is a limit of around 5% to 10% in any single company and 20% to 25% in any sector, applied mechanically rather than by how confident you feel. If a holding going to zero would change your life, it is too large.
How much gold should I hold?
Around 5% to 10% of your investment portfolio is a common approach and is enough for gold to steady a portfolio. Count family jewellery as existing exposure, since many Indian households already hold a meaningful allocation without thinking of it as an investment.
Lessons behind these answers
How to start investing
The order that actually protects you, from emergency fund to first order.
Emergency fund
The unglamorous account that makes every other decision possible.
Charges and costs
Brokerage, STT, GST, stamp duty and DP charges, added up honestly.
Mutual funds
Pooling money with other investors so a manager invests it for you.
SIP explained
Investing a fixed amount every month, and why it removes your worst decisions.
Equity
Owning a piece of a company, what that gives you and what it costs you.