We all have different goals in life. Sometimes they present themselves immediately, sometimes over a period of time. For example, when one starts working, they may not have too much on their mind except regular monthly expenses and some impulsive buys. But eventually, goals arise—a bike or car, weekend get-aways, international trips, marriage, so on and so forth.
Well, there’s a solution that can help us plan for all our financial goals and also be prepared for the newer goals that may arise as we progress through life:
Systematic Investment Plan (SIP)
You can invest a small amount every month through SIP. Not just that, you can also start goal-based investments; this means starting an SIP for each goal. This way, you can use the power of compounding in Mutual Funds for different goals like retirement, marriage, and even buying a car or a house. This is when returns earn more returns in the future—compounding the total return an investor receives. You can read more about the power of compounding here.
For example, one could start their goal-based investments as below:
| Target amount | Investment duration | MF Scheme | Expected returns* | Investment amount |
|---|---|---|---|---|
| Rs 1 lakh | 2-3 years | Debt Fund | 6-8% | Rs 2,500 per month |
| Rs 4 lakh | 5 years | Balanced Fund | 10% | Rs 5,000 per month |
| Rs 25 lakh | 10 years | Equity Fund | 12% | Rs 10,000 per month |
| Rs 10 lakh | 15 years | Equity Fund | 12% | Rs 2,000 per month |
| Rs 30 lakh | 20 years | Equity Fund | 12% | Rs 3,000 per month |
| Rs 1.5 crore | 20 years | Debt Fund | 8% | Rs 30 lakh (lumpsum) |
*Assumed returns for the MF category
Note: For illustration purposes only; actual figures may vary depending on market risk.
Over the years, you can change the long-term SIP investment amounts for each of your goals. For example, once you have achieved your dream of buying a vehicle, you can increase the SIP amount for the other goals by Rs 2,000 each. By doing so, you can accumulate more wealth for your goals than initially anticipated.
Post retirement, you may want to move your investments to a low-risk Fund, like those that invest in low-risk debt instruments to reduce your risk exposure. This can continue to earn returns even after retirement. In fact, these investments can also help you earn a secondary source of income by way of a Systematic Withdrawal Plan.
This way, investing in different Mutual Funds for a suitable duration depending on your goals through SIPs can help you achieve all your dreams and goals in life over different time durations.
*Mutual fund investments are subject to market risks read all the scheme related documents carefully.
