Hyderabad: One single financial goal is not enough to deal with rising costs and expenses in the long term. One has to set multiple goals and make investments accordingly for a financially secure future. A fixed amount should be invested periodically to achieve each financial goal. For this, SIP (systematic investment plan) can be said to be the best among mutual funds.
Most people continue investing the same amount in one SIP for a long period. Even if their income increases, their investments will not increase to that extent. This will lead to a situation in future when they find it difficult to bear the costs of inflation. Therefore, an effort should be made to increase the SIP investment by some percentage periodically. This is called 'top up'.
Recently, a top executive of a leading car company made an insightful comment that 'more priority being given to SIP in funds than buying a luxury car'. Such is the power of 'SIP'. In order to achieve financial goals in the long term, one should strengthen this SIP profile by increasing investments in them regularly. They will yield durable returns. Then you can find it easy to buy a luxury car, own house, foreign vacations, anything without any financials stress.
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On the choice of making right investments, Nithin Kamath, co-founder of Zarodha stock trading platform, had this to say, "Instead of taking loans to buy depreciating assets, invest gradually with small amounts, grow it with compound interest, and then buy what you need. We have got that thrifty mindset."
Thorough planning is needed for making SIP investments. When you open a SIP account, you can say how much percentage of it can be increased after a fixed period. Or you can open a new SIP account every time you want to increase your investment. Note here. The important thing is to increase your investment at a fixed percentage. It's up to you how to do it.
One should adjust finances to steadily increase investments. For example, a person starts a SIP of Rs 5,000 from the 10th of this month. Then it should have 'top up' by 10 percent every six months, or 20 percent every year. This strategy should be followed from the time you start earning till retirement. It is even better to ensure that each financial objective is given a separate set of systematic investment plans.
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Lifestyle expenses keep rising along with rising inflation over time. A top-up SIP has the potential to earn returns that beat this inflation in the long run. Some mutual funds allow inflation-adjusted top-ups. These can also be examined. Whenever the salary increases, instead of increasing your expenses, diverting half of it to investments will have good results. This will prevent future lifestyle compromises.
