Hello Sir , My Age is 25 and I am planning to start SIP although I am investing in stock market I don't have any idea in SIP and my goal is to have a corpus of 4 cr and from next year I will be able to save around 1 lakh rs per month so kindly help
Ans: Thank you for reaching out. It's great to hear you're planning to start investing in a Systematic Investment Plan (SIP).
At 25, you have a fantastic advantage with time on your side, allowing compounding to work in your favour.
Understanding SIP
SIP allows you to invest a fixed amount regularly in mutual funds.
It offers the benefits of disciplined investing and rupee cost averaging, helping mitigate market volatility.
Setting Your Goal
You've set an ambitious goal of accumulating a corpus of ?4 crores.
Starting early and investing regularly will help you achieve this target over time.
Monthly Savings Plan
You plan to save ?1 lakh per month starting next year.
This is a substantial amount and will significantly contribute to reaching your goal.
Expected Returns
Typically, mutual funds can offer varying returns.
For this discussion, let's assume an annual return of 12%. This is a reasonable estimate for long-term equity mutual funds.
Benefits of SIP
Rupee Cost Averaging: SIPs help average out the purchase cost over time.
Disciplined Investment: Regular investments instill financial discipline.
Compounding Benefits: Early and consistent investing leverages the power of compounding.
Flexible Investments: You can start with smaller amounts and gradually increase your SIP contributions.
Convenient and Automated: SIPs are automated, making the process convenient.
Steps to Start SIP
Define Your Goals: Clearly outline your financial goals and investment horizon.
Risk Assessment: Assess your risk tolerance to choose appropriate funds.
Select Funds: Choose actively managed funds for potentially higher returns.
KYC Compliance: Complete your KYC process, mandatory for investing in mutual funds.
Set Up SIP: Decide the SIP amount and start investing through your chosen mutual funds.
Evaluating Fund Performance
Historical Returns: Review the fund's historical performance.
Fund Manager's Track Record: Check the expertise and track record of the fund manager.
Expense Ratio: Lower expense ratios can lead to higher net returns.
Consistency: Look for funds with consistent performance across market cycles.
Monitoring Your Investments
Regular Review: Periodically review your investment portfolio.
Adjustments: Make necessary adjustments based on performance and goals.
Stay Informed: Keep yourself updated with market trends and news.
Disadvantages of Index Funds
Limited Flexibility: Index funds track a specific index, limiting flexibility.
No Outperformance: They aim to match, not outperform, the index.
Market Cap Bias: Heavily weighted towards large-cap stocks.
Benefits of Actively Managed Funds
Potential for Higher Returns: Skilled fund managers can outperform the market.
Flexibility: Managers can adjust portfolios based on market conditions.
Diversification: Actively managed funds often have a diversified portfolio.
Importance of Consulting a Certified Financial Planner
Personalized Advice: A CFP provides tailored investment strategies.
Holistic Planning: They consider your entire financial situation and goals.
Expert Guidance: Benefit from their expertise and market knowledge.
Building a Diversified Portfolio
Equity Funds: For long-term growth, consider equity mutual funds.
Debt Funds: Add stability with debt funds.
Balanced Funds: Combine equity and debt for moderate risk and returns.
Regular Funds vs. Direct Funds
Expert Advice: Regular funds through MFDs with CFP credentials offer expert advice.
Support and Guidance: Continuous support for your investment journey.
Holistic Approach: Regular funds ensure a comprehensive financial plan.
Conclusion
Starting a SIP is a wise decision.
It aligns with your goal of creating a substantial corpus of ?4 crores.
Remember to review your investments regularly and adjust as needed.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
