NEPSE vs SIP vs FD for a 25-year-old in Kathmandu

A cousin called me last Saturday. He's 26, two years into his first real job, just got a promotion. After PF, SSF, rent, food, and the usual expenses, he has about रू 12,000 a month that doesn't have a job yet. The question he was wrestling with: "FD ho ki share?"

It's the right question, asked too narrowly. The honest answer at 25 isn't one of the three — it's a small allocation across all three with a heavy lean toward whatever can compound for 35 years without you panicking out of it.

This is the post for him, and for anyone in the same spot. It assumes you've already got the basics handled: a three-month emergency fund in a savings account, your PF/SSF running through payroll, and ideally some CIT going if your tax slab makes it worthwhile. If not, start with the salary-slip walkthrough and the savings-rate post first — those come before this conversation.

The compounding window is the whole game

Before any vehicle comparison, sit with this number.

रू 5,000 a month into something that compounds at 10% a year (a conservative long-run estimate for Nepali equity, with drawdowns):

Start age	End age	Final balance
25	60	~रू 1.9 crore
30	60	~रू 1.13 crore
35	60	~रू 66 lakh
40	60	~रू 38 lakh

The 25-year-old ends up with roughly 3× the 35-year-old's pile for the same monthly contribution. The 10 years of head start aren't worth 10 years of contributions — they're worth a multiple of the entire final number, because compounding is not linear.

The implication: at 25, the urgency isn't to pick the perfect vehicle. It's to start anything equity-flavoured this month, even at रू 1,000–2,000, and let the next 35 years do what 35 years do. The optimisation can come later.

The three vehicles, framed for your age

You already know roughly what each one is. Here's how each one looks when you have 35 years ahead.

NEPSE direct

What it is. You open a DEMAT and MeroShare account, link a broker, and buy individual companies — NABIL, NIB, NLG, Chilime, Upper Tamakoshi, the IPOs that come around every quarter, whatever you research and decide on.

Where it shines at 25. High agency. You learn how Nepali businesses actually work by watching a handful of them quarter by quarter. The IPO allotment lottery occasionally hands you free returns — a allotted IPO listing 60–80% above issue is not uncommon, even if applying-and-getting-allotted is itself a probability game.

Where it bites. The temperament tax. NEPSE lost about 41.5% from its August 2021 peak to mid-2022; individual stocks can drop further. Holding a stock that's 40% below your buy price for 18 months while your friends post about their gains in another stock is the psychological challenge of direct equity. Most people sell at the bottom and buy at the top.

Honest fit at 25. A sleeve, not the core. 15–25% of your investable money is plenty if you genuinely enjoy reading annual reports. If you don't, a SIP gives you 80% of the equity exposure with 5% of the stress.

Mutual fund SIP

What it is. A monthly auto-debit into a NEPSE-listed mutual fund scheme — managed by firms like Nabil Investment Banking, NMB Capital, Siddhartha Capital, NIBL Ace Capital, NIC Asia Capital, and others. There are 10+ live schemes on NEPSE at any time. The fund manager picks the stocks; you decide how much per month and for how long.

Where it shines at 25. Discipline by design. The auto-debit removes the "should I invest this month?" question that quietly costs people years of contributions. Rupee-cost averaging means a NEPSE drawdown buys you more units at lower NAVs — exactly what you want when the recovery comes.

Where it bites. Scheme selection matters and fees vary across schemes — read each scheme's prospectus for the management-fee and expense breakdown before committing. Some closed-end schemes trade at a discount or premium to NAV on NEPSE — buy near NAV, not at a 15% premium.

Honest fit at 25. The default core. 50–70% of long-term money goes here. A simple, single-scheme SIP that you don't change for the first 5 years is a better outcome than a "diversified" portfolio across six schemes you switch in and out of based on past 1-year returns.

Fixed deposit

What it is. A bank deposit at a fixed rate for a fixed term — typically 1, 2, 3, or 5 years. Currently around 5–6% gross at most commercial banks (top end ~5.5% on 1-year), 5% TDS on interest above NPR 25,000/year.

Where it shines at 25. Predictability for things you actually need. The down payment in 4 years. The wedding budget. The emergency fund extension. The bike you're saving for. FDs are the right answer when "this money has a job in 1–3 years."

Where it bites. As a long-term primary vehicle, it leaves a lot on the table. 5% gross becomes ~4.75% net, and inflation in Nepal has historically averaged 4–7% (though it has moderated to 2–3% in 2025). Real returns over a multi-decade horizon are typically modest. Across 35 years, the gap to equity compounds into something painful.

Honest fit at 25. A liquidity buffer, not a strategy. 15–25% of investable money. Laddered across maturities so you always have something maturing in the next year or two without breaking a deposit early.

A starter allocation

There is no universal answer, but here's a plain-vanilla split for a 25-year-old in Kathmandu earning ~रू 50,000–70,000 take-home, with PF/SSF auto-running and an emergency fund already built. Of the new money you invest each month:

• Mutual fund SIP — 60%. One scheme, one auto-debit, low ceremony.
• NEPSE direct — 20%. 2–4 stocks you genuinely follow, plus IPO applications when liquidity allows.
• Fixed deposit — 20%. A laddered FD for 1–3 year goals or as the buffer above your emergency fund.

If "20% NEPSE direct" sounds stressful, push it into the mutual fund and run a 80/0/20 split. The penalty is small. The penalty for not investing because you couldn't decide is enormous.

If you're in the 20%+ tax slab and have CIT room left, redirect a portion of the FD slice into CIT first — the tax shield beats the FD's yield, even before compounding. See the FD vs MF vs CIT post for the full math.

The behavioural part nobody talks about

The investment that compounds at 10% over 35 years is not the same as the investment that advertises a 10% long-term return. The first one requires you to keep buying through 2018, through the 2021–22 drawdown, through whatever comes next, without flinching.

A few rules of thumb that have worked better than any vehicle choice:

1. Set the SIP and don't change it for 12 months. Including not "topping it up" because last month was green.
2. Don't check NEPSE more than once a week. Once a month is better. The number of decisions you don't make is the number of bad ones you avoid.
3. A drawdown at 25 is a feature, not a bug. Lower NAVs mean your monthly SIP buys more units. You only lose if you stop.
4. Don't over-diversify across schemes. Three SIPs in three "different" equity schemes that all hold the same NEPSE banking sector is one bet, in three wrappers, with three sets of fees.
5. Keep your direct equity small enough that a 50% drop doesn't wreck your morale. Whatever amount that is for you, that's your NEPSE sleeve.

Mechanics: how to actually start this Shrawan

If you've read this far and have nothing set up yet, the practical sequence is small enough to do in a weekend:

1. Open a MeroShare account through CDSC if you don't already have one. Most banks act as DPs and the process is now mostly online. This is the prerequisite for IPOs and direct equity.
2. Pick one mutual fund scheme with a long enough track record — at least 3 years live. Look at expense ratio (lower is better) and whether the closed-end discount/premium is reasonable.
3. Set up a SIP through your bank's direct-debit, monthly, payday +1 day. Start with whatever number you can sustain — रू 2,000 is enough to start the habit.
4. Open a 1-year FD with your primary bank for the FD slice. Roll into a 2-year FD on maturity to start a ladder.
5. For the NEPSE direct slice, pick 1–2 companies you genuinely understand to start. Banking and hydropower dominate NEPSE's liquidity; that's where most retail learning happens.

You will get the sequence wrong in small ways. That's fine. The goal at 25 isn't to optimise — it's to start the clock.

Tracking it in Kharchapatra

Three accounts, mirroring the three vehicles:

• Mutual Fund — investment account. Log the monthly SIP debit as a transfer from your bank account, not an expense. Update the balance with current NAV × units once a month.
• NEPSE — investment account. Log buys as transfers, sells as transfers back. Dividends and bonus shares received via MeroShare can be logged as income (covered separately in a future post).
• Fixed Deposit — bank account. Log the deposit as a transfer; mark maturity in the description.

The point isn't to recreate Bloomberg. It's to see, on one dashboard, that you actually invested this month — and that net worth is moving up despite NEPSE making whatever face it's making this quarter.

What you actually need to decide

Three questions, asked once:

1. How much can I sustainably invest each month? Pick a number you can hit twelve months in a row. Half of an aspirational number beats none of it.
2. How much variance can I sit through without selling? The honest answer here sets your equity-vs-FD split, not the spreadsheet.
3. Will I let it run for 5 years before judging it? If yes, a SIP is the boring right answer. If no, you don't actually have a long horizon — work on the temperament before the asset allocation.

Get those three right and which scheme, which broker, which 1-year vs 2-year FD becomes detail. Get them wrong and no vehicle saves you.

If you're in this exact spot and want help walking through the numbers on your own salary, email parjanya57@gmail.com. I'm collecting cases for a follow-up post on real starter portfolios from real Nepali 25-year-olds, anonymised.