New Delhi: Mutual fund investments have picked up momentum in India with investors using two main ways to invest in this asset class – lump sum and Systematic Investment Plan or SIPs. The latter involves putting a relatively smaller amount regularly – daily, weekly, monthly – in an MF scheme.
In April this year, the money flowing into the markets through SIP crossed Rs 20,000 crore for the first time and reached Rs 20,371.47 crore. The months of May, June, July and August clocked SIP inflows of Rs 20,904.37 crore, Rs 21,262.22 crore, Rs 23,332 crore and Rs 23,547 crore. Let’s see how goal-based SIPs can help a common person to buy a house/flat by the time he/she reaches mid-forties, without incurring a lot of debt.
Target in 15 years
Think of a person who starts earning at 25 and starts investing systematically to buy a flat or house by the time he/she reaches 40-45 years. See how SIP can help in this quest. The target is to accumulate Rs 1 crore. A goal-based calculator will tell you that if this person invests Rs 20,016 every month for a period of 15 years, an amount of Rs 1 crore will be generated. By that time he/she will turn 40. The underlying assumption is that 12% returns will be generated on the investments.
Target in 20 years
Now consider our investor giving himself/herself 20 years to accumulate Rs 1 crore. In this case, he/she has to invest Rs 10,108 or just about half of the SIP amount required in the first instance. Now, if the rate of returns exceeds 12%, which is not impossible, the amount of Rs 1 crore will be reached even faster.
Target Rs 1.5 crore
If this person wants to accumulate Rs 1.5 crore and go for a bigger flat, then he/she needs to put Rs 15,162 a month in SIP to run up that amount in 20 years. Therefore, by the time he/she turns 45, he/she will have that amount to finance a flat or a house.
The calculator shows that if he/she sets a target to buy a flat in 15 years, the investor has to put Rs 30,025 in SIP every month.
Mutual Fund SIP investment: Here’s how goal-based investment can be effective in helping someone to reach financial targets in life. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
