The Power of Systematic Investment Planning (SIP)

Systematic Investment plan or SIP is one of the best investment tools for anyone who has a regular income. If you are a young salaried and want to save money, there is nothing more convenient than an SIP.



Investing fixed amount of money on fixed date every week, month or quarterly is called Systematic Investment.

There are three main options you can choose for investment in this plan.

1. Shares - Buying same amount of shares every month without looking at price.
2. RD in Banks - same amount every month being fixed
3. SIP in Mutual Funds - Investing same amount of money every month on a pre-decided date

Any option can be taken according to your risk profile.

Let's see the pros and cons of each option.

1. Buying shares every month in a fixed quantity is a good idea. But as we all know, investing in shares requires lots of research, good amount of money and lots of time to monitor. Risk is very high in shares and it gives the option to choose fixed quantity but not fixed amount of money. So you cannot plan in advance how much money you will need every month.

2. Bank RDs are safest option as it gives you fixed maturity amount after a fixed period. But there are a few things that make it less popular option.

• Low liquidity. If you want to withdraw money before the maturity date the return will be less than expected.
• You cannot partially withdraw small amount in between even if you need it.
• The interest rates are very low compared to other options which make it less popular in young people.

3. Mutual Funds SIP offers most flexible choices according to your budget, liquidity and risk profile. You can even start from just Rs. 500/- a month and withdraw within 7 days if you need it in emergencies. You get returns as good as share market but no need to do any research as you money will be managed by professionals. It makes it less risky in comparison to direct shares. It is very much recommended to take advice from Independent Financial Advisers to plan your investments and help you achieve your Long Term Financial Goals.

I will share a real life example of planning we did for one of my esteemed client who has taken a Home Loan in Year 2016 for 45 Lakh Rupees (Monthly EMIs payable for next 20 years) and is now planning to pay it off completely by Year 2025 with the help of Systematic investing in mutual funds. He wanted me to plan his part of SIP investment in such a way so that he could reduce his total home loan outstanding by systematically withdrawing 5 Lakh Rupees every year and to clear it off completely well before Year 2025.

I am so glad to share that he has already paid off 10 Lakh Rupees in last 2 years and now his total Home loan outstanding has come down to 35 Lakh Rupees. I salute him for keeping his trust in me despite all kind of volatile moments in equity markets in last 5 years of our relationship. I simply love to share his example in my presentations while meeting with new clients.

Stay healthy and keep investing.

For all your investment needs, call WealthMaster.in Team @ +91-9810582989 or email at wealthmaster.in@gmail.com

Disclaimers:

The views expressed in the blog are those of the authors and do not necessarily reflect the official policy or position of any other agency, organization, employer or company.

Insurance is the subject matter of solicitation.

Mutual Funds investments are subject to market risks. Please read the offer documents carefully before investing.