The responsibility of planning ahead becomes critical as many are opting for an early retirement and the average life expectancy has also increased due to advanced medical innovations.
After years of hard work, the one thing that one possibly looks forward to during retirement is to spend time with family, take the dream vacation that they have always postponed to a future date or probably pursue a hobby that always took a backseat during the professional life.
However, not many have the safety net of a pension or the adequate financial resources to fuel these goals, which then remain as dreams. A survey by Nielsen reveals that over 51% of Indians who participated in the survey stated that they had not planned for retirement at all.
The responsibility of planning ahead becomes critical as many are opting for an early retirement and the average life expectancy has also increased due to advanced medical innovations. Thus, you need to start taking the first step towards investing for 10-30 years period, for a happy retirement. One effective mode of investing is mutual funds, where you effectively make your money work for you.
Investors often can get caught up on focusing on the top rated mutual funds that perhaps maybe performing well over the short-term. However, the accepted rule of investing is to ignore short term market fluctuation and focus on long term investing.
This is where SIPs (Systematic Investment Plan) come into the picture. SIP is a mode of investment similar to starting a recurring deposit with your bank savings account. However, the one difference with an SIP is that your money is invested in a mutual fund scheme which has market risk and no minimum capital protection like a bank.
How can SIP help you in your investment journey?
- SIPs bring Rupee cost averaging
The very nature of SIPs is precisely to avoid timing the markets. When you invest in a fixed schedule using an SIP, you avoid the hassle of trying to figure out the exact best time to invest.
What this effectively means is that you automatically buy more units when the mutual fund NAV (Net Asset Value) is low and fewer when the NAV is high.
The Table above is for illustration purposes only
The rupee cost averaging effect – averages out the cost of your units and hence controls volatility.
- SIP in mutual funds help you cope better with inflation
When one thinks of financial market, the very first thought directs to market risks. Surely, mutual funds are subject to market risks. But there is one other risk that is often neglected. Inflation.
Consider this illustration to see how inflation impacts with time.
SIPs in equity mutual funds help you cope better with the effects of inflation on your savings versus other financial instruments.
Hence, an SIP into Mutual Funds can help you achieve your envisioned financial goals.
- Light on the wallet
Generally, SIPs start as low as Rs. 500 per month.
- SIPs bring in the power of compounding
Retirement goal of tomorrow depends on making the right decision today. The best time to start planning for your retirement is when you start working. SIP brings the power of compounding. This effectively means that the sooner you start makes a lot of difference. ,. The infographic here shows how starting early helps keep your SIPs smaller and helps to reach your goal in a disciplined manner.
- SIP brings Flexibility
Investor can create/update/cancel SIP anytime.
- SIP brings discipline
Using an SIP, one can invest small amount periodically (weekly, monthly, quarterly) into a selected mutual fund. Automated instalments enable you to be more committed to your goal.
The takeaway that you need to remember is, an SIP is all about discipline. Every drop contributes towards a mighty ocean. It is like staying on course to a roadmap on your journey towards fulfilling your financial goals. All it takes is start that first step and the time to start is now!
An Investor Education and Awareness Initiative by Quantum Mutual Fund.
Investor should deal only with Registered Mutual Funds of which can be verified on the SEBI website under “Intermediaries / Market Infrastructure Institutions”.
Investor can approach Investor Relation Officer of Mutual Fund for redressal of grievance or complaint. If the compliant remain unresolved then can approach SEBI or can lodge complaint on SEBI SCORES Portal https://scores.gov.in.
Know Your Customer (KYC) is compulsory for investing in mutual funds. For KYC investor to submit KYC form along with the Proof of Identity and Proof of Address to KYC Registration Agency. For details, please click here.
Mutual fund investments are subject to market risks, read all scheme related documents carefully.
The above article is sponsored by Quantum MF.