Retirement is one of the most important events in everyone’s life. Peoplewant their golden years to be a phase of rest and recreation, with time to pursue hobbies or interests (which take a back seat in their busy work schedules).
While you look forward to enjoying the fruits of years of hard work, lack of funds can be a severe dampener in the retirement years. For the majority of Indians, having a good retired life is a seriousconcern, as retirement planning is often not taken seriously at the right age.
Keeping all these factors in mind, a systematic financial approach is required for retirement planning. While there are ample options for long-term retirement planning, mutual funds schemes including SIP facility can potentially give much higher returns at the time of retirement.
Importance of KnowingYour Needs before Investing
Before investing through a SIP fund, ask yourself these questions:
- How many years are left until you retire?
- How much corpuswill you need during the golden years?
- What is your risk-taking ability?
- How much monthly income you will need to sustain your current lifestyle?
Planning will become simpler once you answer these questions. So, no matter how much your investment is, what your risk-taking ability is, what your investment horizon is, there isa mutual fund for every need.
For instance, for capital appreciation, you can invest in equity funds, whereas if you are looking for regular income, you can go for debt funds. Thus, in terms of risk, you can invest in high-risk funds (sectoral funds), or hybrid funds, which invest in both equity and debt.
Starting Out with A SIP for Building Your Retirement Kitty
A simple way to build your investment corpus is to invest in a systematic investment plan (SIP) of an equity mutual fund. This is because equity funds are ideal for earning years as equities tend to outperform most assets over long periods. Additionally, SIPs help smoothening unpredictable market movements as it accumulates more units when the markets fall.
Another approach is to start moving towards debt funds when your retirement is five years away. You can use a Systematic Transfer Plan for this. The idea behind this is to reduce risk and build the portfolio, which gives consistent income after retirement.
Why Retirement Planning with SIPs?
- SIPs Are Light on The Wallet
As SIPs enable you to invest smaller amounts at regular intervals (daily, monthly or quarterly), it reduces your burden of paying a lump-sum amount. For instance, even if you cannot invest Rs 5,000 in a go, it is possible to trigger your mutual fund investment with an amount as low as Rs 500 per month.
- SIPs Enable Rupee-Cost Averaging
Due to the feature of rupee-cost averaging,more mutual fund units are boughtwhen prices are low, and similarly, fewer mutual units are boughtwhen prices are high. This infuses good discipline by forcing to commit cash at market lows when other investors are wary and exiting the market.
- SIPs Are Effective Medium for Goal Planning
Very often people invest in the equity markets with a motive of making short-term gains, but often ignore it as a window for long-term wealth creation.
Your retirement goals like buying a house, providing good education to your children, or getting them married well, can all come true with systematic financial planning. Yes, you can achieve your financial goals by enrolling for SIPs. However, the earlier you start,the better it is.
Example:
Let’s say you are 25 years old with a salary of Rs 30,000 per month.
If you invest Rs 2500 in Equity SIPs every month, considering annual returns of 12.5%, your savings after 35 years can grow to about Rs 1.7 crores.
Also, considering that your income will rise every year and if you increase your SIP amount by 5 percent every year, you can accumulateRs 2.5 crores. That’s a huge amount!
Conclusion:
In times of volatility, SIP funds would undoubtedly prove to be a prudent route to build your retirement kitty. If all the points mentioned above encourage you even slightly, then you are on the right track.
But, if you are thinking that “I can simply do that by going through mutual fund ratings”, hold back that thought.The fact is- you need to take into accountparameters such returns, risk, Assets Under Management and so on while investing through SIP mutual funds.
So, carefully select the SIP mutual fund that suits your needs, invest in one and live a peaceful life ahead.
Happing SIPing To You!!!
Follow our WhatsApp channel
