Begin financial journey with SIP

Posted On Thursday, Feb 06, 2014

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These days many of us rely on GPS (Global Positioning System) to go places. With the amazing GPS technology we can reach almost any destination on the planet correctly, even if we did not know of the existence of such a place before!

For those of us who have moved over to smartphones GPS has replaced traditional paper maps. Guess it's time we got a bit financially savvy too and start using GPS to help reach our financial destinations as well? But here the only twist is that GPS stand for ‘Goal Plan SIP’.

The first thing GPS (the technology) sorts out is identifying your current location. Therefore, you can begin with taking stock of where you are right now, financially. What is the value of all your investments, including employer provided Provident Funds (PFs). After GPS has picked up where you are, you can allow it to guide you to your destination.

Goal

A goal is nothing but your destination. Have you ever set out on a journey without a place in mind? We don’t start a journey to simply be on a journey; we wish to reach somewhere. See your finances the same way. What are those events you need to prepare financially for? Define your financial goal in terms of how much money is required and when they are likely to occur. It could be your retirement, child’s education & marriage, buying a house, a foreign trip etc.

Have clear, measurable and realistic goals. Make use of the numerous online tools and calculators available for the purpose. You can check the Financial tools and calculators of Quantum’s website for a few interesting ones. The journey will certainly be more pleasant and also more disciplined if you follow a goal-based saving and investing lifestyle than the ad hoc invest-what’s-saved-after-spending lifestyle.

Plan

This is the route and vehicle you would take to reach your selected destination. What are the steps you need to take in order to fulfill or achieve your financial goal is decided in this phase. You might decide that to comfortably reach there you may need to trim a few, avoidable expenses. Or you might realize that certain corrective action needs to be taken for some bad financial/investment decisions made in the past. Chalk out a plan that leads to your destination.

You also need to select a suitable vehicle to ride in on this important journey. What financial instruments you choose and their proportion in your portfolio depend on your goal or your destination, the time you need to arrive at your destination is it a long term goal or a short term goal and other aspects like your risk appetite, etc. You might also need allocation in instruments like Bank FD’s, PPF, etc. Besides through mutual funds too you can invest in the asset classes of equities, debt and gold. Our previous QED article on choosing asset classes for different life stages might come handy.

You can always enroll a financial planner’s service in building a customized plan for reaching your goal. The financial plan prepared should be simple and workable. It should also be flexible enough to accommodate unexpected events along the way. Take the vehicle for servicing to your financial planner once every while so problems can be caught before they can cause disaster.

SIP

SIP (Systematic Investment Plan) of mutual funds makes investing more convenient. You can choose to invest appropriate amounts monthly across various asset classes, and build the desired corpus little by little, step by step. Start an SIP in the mutual fund scheme of your choice suiting your goal and, more importantly, hang on until you reach your destination.

Through SIP you can give your investments risk exposure gradually. In SIP you can also benefit from the concept of rupee-cost averaging, where you buy more number of units when the markets are down and NAV is low and less number of units when the markets are up and the NAV is high.

Moreover, if your investment journey is long i.e. if your financial goal is for more than 8 - 10 years, this GPS (Goal Plan SIP) will too help you reach your destination. Finally, you should also consult your financial advisor and get their advice to get a plan ready for building the desired corpus.

So go ahead, set your Goals, lay out Plans and use SIP for a happy financial journey.




Disclaimer, Statutory Details & Risk Factors:
The views expressed here in this article are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader. The article has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and views given are fair and reasonable as on date. Readers of this article should rely on information/data arising out of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments. Please visit – www.quantumamc.com/disclaimer to read scheme specific risk factors.

Above article is authored by Quantum.

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