The SIP way to Financial Freedom

Most individuals are confused as to how to plan their finances. Especially when it comes to investment, one is torn between investing in real estate, Gold, Stocks, Mutual Funds or go traditional by opting for fixed deposits. We normally go by the advice of our friends, relatives or any acquaintance. Now predicting your returns on these investments are purely speculative and your success in each of these depends on how well you understand the industry, market and potential.

For the sake of argument, let us look at Mutual Fund investments in the long term, assuming that the return on investment is going to be 15%..  Ideally you should start investing from your first job itself to take advantage of the power of compounding. A small investment of Rs.1000/month over 10 years can get you 2.75 Lakhs, over 15 – 6.7 Lakhs, over 20 – 15 Lakhs and so on and so forth. So you can see that the longer you stay invested, the better your returns are. This is possible due to the power of compounding.

Let’s say a certain Mr. Singh lands his first job at 20 years and starts a SIP of Rs. 2,000 for 5 years. This would potentially earn him 1.75 Lakhs at maturity, which can easily fund the down payment for his first car. Similarly if he continues to invest a systematically throughout his professional life, he will be able to retire into a financially independent life.

Looking at the chart below listing the investment plan and expected return, you can see how much a small investment of Rs, 5,000/month can get you over a 25 year period. A whopping Rs. 1.6 Crore.

Life Stage Age Purpose SIP Amount Period (Yrs) Expected ROI Total Investment Maturity Amount
Job 20 Car 2,000 5 15 120,000 175,000
Settled 25 House 5,000 10 15 600,000 1,375,000
Family 30 Graduation 3,000 15 15 540,000 2,000,000
30 Higher Education 3,000 20 15 720,000 4,500,000
30 Child’s Marriage 2,000 25 15 600,000 6,500,000
35 Pension Corpus 5,000 25 15 1,500,000 16,000,000
Total 4,080,000 30,550,000

You can see that by calibrating your investments at each of your life stage can go a long way in meeting your financial goals. Let’s take a look at his returns and what life event it was used for.

@ 25 Years – Rs. 1.75 Lakhs as down payment for Car

@ 35 Years – Rs. 13.75 Lakhs as down payment for House

@ 45 Years – Rs. 20 Lakhs for child’s Graduation

@ 50 Years – Rs. 45 Lakhs for child’s higher studies

@55 Years – Rs. 65 Lakhs for child’s Marriage

@ 60 Years – Rs. 1.6 Crore Retirement Corpus

And how much did he invest in all – little more than Rs. 40 Lakhs over a 40 year period.

So contact your financial advisor today and sign up for a SIP. A small investment today can set you on the path towards a fulfilling and financially free retired life.

Disclaimer: Mutual Fund Investments are subject to market risks. Read the offer document carefully before investing.

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