Are you one of those who at the end of every month is broke?
Are you the one who doesn’t have a track of any of their expenses, no matter how little they are?
Then perhaps you don’t have a habit of preparing a budget.
For most of us, certain expenses are fixed, like rent of the house/ flat we live in, expense on essentials like grocery expense and paying other bills, a shopping spree and partying.
Since rent and household expense forms a major expense, most of us think that major chunk will be saved. However, this doesn’t happen.
And by the end of every month, we are broke!
You may think that you are not expending much, but actually, you are. Zero balance at the end of every month is proof of it.
Hence, preparing a budget is important and sticking to it is even more!
Further, the habit of saving will definitely help you In achieving long-term goals, although SIP investment will do it sooner!
SIP Investment is an investment in the equity and debt market through mutual funds. Any mutual fund scheme has a diversified portfolio. This not only reduces the risk of loss but also ensures you against market uncertainties.
Why one should do SIP Investment?
Over the years, especially this generation has forgotten how to save money. They state reasons like high cost of living, rising inflation, etc. Hence, this generation is pretty convinced that “saving to ni ho paayegi”.
Hence, as a better alternative to saving, SIP investment comes into the picture.
The thing with mutual fund SIP investment is, the SIP amount gets automatically debited from your account at the pre-decided date. So, it not only instils discipline in you but also a habit of investing.
Further, you should follow the 50-30-20 rule.
The best thing about Mutual fund investment is, you don’t directly invest in the equity market. You’ll have a diversified portfolio.
Have a look at the following reasons, as why SIP Investment is any day a better and a profitable option than saving or equity and debt investments:
- It instils the habit of saving in you, INDIRECTLY: The SIP investments get automatically debited from your account at the pre-decided to date. Hence, that particular amount not only gets saved but also gets invested. This is perhaps a very good option for millennials since they hardly save any penny in a month.
- The best option for Goal Planning: You can do goal planning with SIP Investments as well. Hence if you want to plan for your retirement, you can easily compute with the help of retirement calculator. You just have to put in few basic details such as a number of years left for retirement, our current age. Etc. It will automatically calculate your corpus for retirement. Hence, you can decide as per your goal, how much to invest monthly in SIPs and what mix of funds you should choose to achieve your goal.
- Your SIP Investments are managed by professionals: All the mutual fund schemes are managed by professionals. The fund managers These fund managers (professionals who manage that specific fund scheme) keep track of the markets, which are the best stocks to bet on when to buy and sell them. Hence, most of the research job is already done by these fund managers. All you have to do is look for a fund that suits your goal requirements and risk capability. For that, a good financial advisor can help you out.
- If you invest directly in equity, you can invest in variety. However, with mutual fund schemes, you can invest in a variety of stocks. SIP investment gives the option of both diversification, i.e., in a variety of equity stocks and debt as well. Hence, you can be sure of not losing your money.
- Grow your wealth exponentially. The longer you stay invested, the better it is. Your SIP investments grow as a result of the power of compounding.
How one can do SIP investment?
Apart from the technicalities involved, like completing your KYC, FATCA, and other things, what’s more important is that you should ask yourself why and how to about the entire process of investment.
Consider the following points:
- What is your motive for investment? Every plan should have some goal so that you try hard to achieve it. Hence, before you decide on starting your SIP investments, make sure that you know why you want to invest. Most of the people have goals like going on a vacation, buying a car, having your own home, retirement, education and marriage of your child, or any other dream of yours. When you are sure about your goals, most of the things are simplified.
- Set a time frame for your goals. When you know what are your dreams for which you want to invest, set a time frame. For example, the retirement time frame will whenever you are going to turn 60, so calculate after how many years you are going to turn 60, and hence prepare your plan accordingly.
- Choosing the right mix of funds. If you have quite an idea of financial planning or with the help of an advisor, you can choose the right mix of asset classes to achieve a particular goal. Hence, you have to choose pure equity, pure debt or hybrid can be decided only after deciding your goals and the time required to accomplish those goals.
- Initiate the process of your SIP investments. If you are a first-time investor, you have to fill Know Your Customer form. Further, you also have to fill the SIP mandate as well.
Points to remember while doing SIP Investment
Start early, save more
The sooner you start, the better it is. As mentioned above, the longer you stay invested, the better the returns you generate. Further, investing a few thousand bucks every month won’t be heavy on your pocket. Hence, start your SIP investment as soon as you get the first salary in your hand.
Periodically review all your SIP investments
This is perhaps the most important point to remember. You, with the help of your financial advisor or all by yourself, should periodically review your SIP Investment portfolio. This should happen every four to six months. You should continuously review so that your SIP investment remains aligned with your goals.
Avoid any liability for short-term gains
Credit cards and personal loans look pretty attractive in the short run. The EMI option looks simple and affordable, however, you end paying more than the price of the purchased product. It of no use to purchase an asset whose value degrades over time. It is recommended that one should not go for such loans and avoid excessive use of credit cards.
Go for a Financial Planner
It is any day recommended that you should go for a financial planner. You can Google out some Certified Financial Planners that can come to your aid for this purpose. One such Certified Financial Planner is Mr Mukesh Gupta. He is Fellow Chartered Accountant as well and director of Wealthcare Securities Pvt Ltd.