25 July, 2019
If you are a Central Government employee, most of the financial aspects of your retirement are already sorted by the government. But for those of you who are working in the private sector or are self-employed, retirement planning is essential. A mutual fund is one of the few investment avenues that can beat inflation it is imperative that you make mutual funds the centerpiece of your retirement planning.
In simple terms, a mutual fund pools money from different investors and then invests that money in various equity stocks, debt and money market instruments. In the long run, mutual funds offer excellent returns and help build a corpus for your post-retirement needs.
If you have an investment horizon of at least 20 to 30 years and want to make mutual funds the start of your retirement plan, then systematic investment plan (SIP) will help you accumulate and compound wealth in an affordable manner.
Systematic Investment Planning, better known as SIP, is a systematic approach to invest money in mutual funds. Under SIP, you invest a fixed amount in the fund of your choice every month. There is no upper limit to investing via SIP, but it is desirable to fix an amount which you can afford easily every month. In addition to instilling financial discipline, SIP helps you learn money management skills, which help further with the planning your retirement.
Let us elaborate with an example. Suppose you are 30 years old and you start a monthly SIP of Rs. 5,000/-. Assuming that the returns on your investment are 15% p.a. (which is a standard rate for most mutual funds) and you continue the SIP for 30 years. By the time you are 60 years old, you will have a corpus of Rs. 3.46 crores approximately. Very few other investment avenues offer you such returns with moderate risk.
Using the SIP route to plan your retirement fund is an excellent approach as it offers you several benefits like:
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Also read: Overview of MF Industry & Growth Prospects
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