Can SIPs be the answer to your early retirement?

ArticleCan SIPs be the answer to your early retirement?


Can SIPs be the answer to your early retirement?

By Pooja Chauhan

Right before the pandemic struck, India was witnessing a growing consumer spending. In fact, in the past few years India saw the double-digit growth in credit cards which became one of the fastest growing retail credit segments. All this has been on the back of rising discretionary spends of millennials and growing middle class.

While it is good to spend on your lifestyle aspirations, it also becomes critical to save a slice of your earnings for the rainy days. One often see people, especially the millennials, sharing concerns about their inability to save, no matter how much they try to cut on their spending. What they often fail to realise is that savings are built through discipline. It does not matter ‘how much you save’ but what matters is to make sure that ‘you save’.

Systematic Investment Plans (SIPs) are a great way if you are looking to build that discipline in you. It allows you to make fixed investments at fixed intervals that allows you to grow your corpus over a time through compounded growth. From early jobbers to people close to their retirement, can make use of this tool to ensure a comfortable saving balance. In fact, popularity of SIP investments in mutual funds has witnessed a significant increase in past few years.

It’s true-no amount is a small amount: When it comes to SIPs you can start even with INR 500 every month. The only important thing is that you schedule those monthly investments without any disruption

Think of it as EMI: If you are still reluctant about choosing SIP tool then you may think of it as an EMI that is mandatory to pay every month but will end up delivering you good returns on a long-term

Keep the investment tenure long: It is always advisable to invest for a longer-term in mutual fund SIPs. While there is no ideal tenure, but it can be anything from 5 years to 15 years during which you can expect good returns. The returns, of course may vary depending on the performance of the mutual fund and market conditions

Choose a product that serves your goal: When you decide to go for an SIP, first study the available investment instruments and map them against your requirements and risk profile. If you are in your 20s and are looking to invest for retirement, then you may consider equity-oriented mutual funds which tend to provide higher returns. If you close to your retirement age, then sticking to a debt-oriented mutual fund is advised. It is advisable to consult a financial advisor before you make a choice.

Do not stop SIPs in the market downturn: Most people often worry if they should continue investing through SIPs during the market downturn, especially when they see their portfolio is not doing well. However, one should remember that it is during such market lows that your portfolio stands to gain in a long-term. Muted market means availability of mutual find units at lower rates at that point of time. During the buoyant market, the same unit that you bought at lower prices will yield you good results with higher prices.

Track your portfolio: While it is not advisable to get jittery about your SIP investment portfolio every now and then, but you should review the performance of your investments at regular intervals. However, don’t expect your mutual funds to yield high results under 3 years duration. But if your investment has not performed well or hasn’t given you desired results in 3-4 years then you may consider switching to a different scheme.

While you consider these things as you make your decision, it is worthwhile to note that it is good to invest in different mutual fund SIP plans rather than putting your money under one. This will ensure that you are not putting all your eggs in one basket and will lower your risk level.

When it comes to savings it is good to start as early as possible. An early investment can lead you to realise your dreams earlier in your life than you expect. Whether it is early retirement or buying a three-bedroom house or travelling the whole world, everything is possible, provided you know when and how to invest and save.

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