February 23, 2024
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Retirement is that golden era of an individual’s life when they can do everything their heart desires for. Be it going on a world tour, or picking up on hobbies, on developing a new skill, the ample time and resources in hand allow individuals to take a break and enjoy life. However, to enjoy a stress-free retirement, you must have enough funds to sustain your retirement era. Several individuals have this idea that they can accumulate a substantial amount for their retirement by investing in different type of investments when they near their retirement. However, they could be more inaccurate. Retirement is a significant aspect of any individual’s life, and you must plan for it as soon as possible. Delaying it will only increase the burden on you later in life when you have added responsibilities and debts to pay off. Let’s understand how you can plan for you retirement with the help of SIP investment.

What is SIP?

Systematic Investment Plan, popularly termed as SIP is a means to invest in mutual funds. Under SIP mode of investment, systematic and regular investments are made periodically for a predetermined period of time. SIP investments allow investors to invest in mutual funds with an investment amount of as low as Rs 100 per month. As regular investments are made towards mutual fund schemes, it offers a sense of investment discipline to investors.

How do SIPs help to attain your financial goals?

When you invest in SIP, you invest in the markets despite the underlying market situation. This means that you invest in both bull market phases and bear market phases. As a result, an investor ends up accumulating higher number of mutual fund units when the markets are in the slump as compared to when the markets are soaring high. This helps to average out the total cost of the units bought. This concept is popularly termed as rupee cost averaging.

SIP investments also allow investors to enjoy the benefits of the power of compounding. Compounding allows investors to grow their investments at an exponential rate over a prolonged period as their returns are further invested to earn more returns.

As mentioned above, SIP investments are also light on the pockets of investors and they do have the burden to arrange a substantial amount at any point of time unlike lumpsum investments.

How to accumulate Rs 10 crore by the age of 50?

Let’s assume you begin investing towards your future from the age of 25. Now, this gives you an investment horizon of 25 years. As you wish to create wealth with a long-term investment horizon, it makes sense to invest in equity mutual funds. Let’s assume you invest in an equity fund that offers average returns at 12% per annum. Now, using a SIP calculator, you can easily deduce that you would need to invest Rs 52,698 every month. An SIP return calculator is extremely helpful to understand the future value of your investments and plan your investments accordingly. If this a substantial amount for you at the moment, you might consider stepping up your SIP investments by a fixed percentage, say 10% per annum. This will allow you to invest a lower amount in the beginning. Happy investing!