A Systematic Investment Plan (SIP) is a vehicle offered by mutual funds to help you save regularly. It can be compared with bank Rd’s and Rd’s with post offices the only difference being mutual funds invest in debt, equity or both.
Mutual fund companies invest on your behalf in your selected fund every month on your pre-selected dates. The amount too is pre decided by you and on that day you are allocated units on the basis of its Net Asset Value (NAV). For example you invest Rs 1000/- pm and your pre selected date is 1st of every month, so now on Dec 01 when you invest NAV is 20.00 and you are allocated 50 units of that fund.
SIP is one of the best ways to indulge in disciplined savings as your money is auto invested every month regardless of market being up or down.
In short-run SIP’s return might not be daunting but in long run these returns tend to outperform traditional means of investment like FD’s and RD’s.
There are various benefits of having a SIP like –
- Diversification benefits offered in mutual funds by investing in a basket of stocks.
- Mutual funds are professionally managed and are regulated by SEBI.
- These are liquid –you can sell when you need your money back.
- With SIP’s one tends to indulge in disciplined savings, as you tend to invest a particular amount every month or quarter.
Already in your 40s and no retirement plans? These tips can help you
Goals is what makes us earn and invest, everyone has a goal. What do you do to achieve your goal?
Your goal is to have Rs 2 crore when you retire. First of all you should define your goal – by when do you want to retire? How much money would you need then?
Then start with the next setup of planning… How would you go about planning the financials? You need Rs 2 crore when you retire in next 20 years and at the moment you have no investments made or planned for your retirement.
Regular small investments in form of SIP will work wonders as you get the benefits of SIP. A 2 crore retirement income would require an approximate investment of Rs 25,000 pm in SIP for 20 years. A retirement income should match your current salary; you can always keep on adding more amount to SIP’s every year as you get a hike or a bonus.
A long term plan will involve more of equity than debt but again depends on individual risk tolerance.
All you have to do is start saving and investing every month is a preferred asset allocation which suites your long term goals.
An initiative by Birla Sun Life Mutual Fund – Sabse Important Plan can help you to identify which fund to invest in based on your goals, income, risk tolerance, etc. It tells you how much to invest where to achieve your goals. You can also invest directly from the link mentioned below.
Find out what’s the right fund for you here – https://sipnow.birlasunlife.com/