How to Secure Family's Financial Future with SIP Investment

Running a family in today’s time is not easy, especially if you are the sole bread winner. Due to inflation, basic necessities that had a nominal price to them two decades ago have now three folded in terms of pricing. A bottle of mineral water that costs Rs. 5 a decade ago now costs. Rs. 10. That’s almost twice the price in just a span of 10 years. Unfortunately, there hasn’t been a similar growth in people’s income, making it difficult for many households to make daily ends meet. Because of this, a lot of people are having a tough time saving from their monthly income and investing some portion of it for future financial stability. This is why we have to change the way we save. These days, it is better to allot some portion of your monthly income for saving and investing as soon as you receive our paycheck, rather than spending everything and then investing what is left.

To make an investment, investors first need to understand their short term and long term financial goals. That’s the first step of financial planning, determining and prioritizing your goals. One you have a defined set of goals, you get a clear picture of how much money you need save to make regular investments. Also remember that every individual’s financial needs are going to vary based on several aspects. If you have aging parents to take care of and at the same time have to pay your children’s school fees, you cannot take much risk as you have a boulder of responsibilities on your shoulder. Fulfilling such responsibilities is not an easy task and hence, investors have to make sure that they save and invest so that in future, these responsibilities do not burn a hole in their pocket.

If you are someone who is young, aggressive and seek capital appreciation through systematic investments, you may consider investing in mutual funds via SIP. Before we move to SIP, let us understand what mutual funds are and how they work.

What are mutual funds?

Mutual funds are an investment vehicle for pooling funds on behalf of investors who share a common investment objective, and invest this pool of funds across the Indian economy. This pool of funds which fund houses invest in behalf of investors in various money market instruments is referred to as a mutual fund. This money is invested across multiple assets like equity, debt, certificate of deposits, corporate securities, debentures, call money, commercial papers, etc.

SEBI, the regulatory body of mutual funds in India, defines mutual funds as, “a mechanism for pooling the resources by issuing units to the investors and investing funds in securities in accordance with objectives as disclosed in offer document. The profits or losses are shared by the investors in proportion to their investments. The mutual funds normally come out with a number of schemes with different investment objectives which are launched from time to time.”

What does SIP stand for?

Systematic Investment Plan is an easy and hassle free way to invest in mutual funds without having to physically visit the fund house periodically. With SIP, investors can invest a fixed amount at regular intervals (mostly monthly) and continue investing systematically till their investment objective is achieved. All you have to do is instruct your bank and every month on a fixed date, a small amount is deducted from your savings account an electronically transferred to your mutual fund.

Starting a mutual fund SIP might help you secure your family’s future

If you start a mutual fund SIP at an early stage in your life, keep a long term investment horizon and remain committed to your investments, you might be able to build a sustainable corpus that will take care of most of your financial needs. Investing in SIP has its own perks. First of all you benefit from rupee cost averaging. When the NAV of the fund you invested in goes down, your portfolio is allotted more units. Similarly when the NAV spikes, you are allotted lesser units in quantum with the investment amount. This adjustment of SIP amount is referred to as rupee cost averaging. Also, when you start a mutual fund SIP and invest regularly, your small investments may multiply and in the long run you may benefit from the power of compounding. Compounding holds the advantage of turning small investment amounts into commendable corpuses. However, it is necessary that investors do not get affected by the daily market vagaries and withdraw their mutual fund units beforehand. The key here is to continue investing in mutual funds in a disciplinary manner without skipping your monthly SIP.

If you want to build a corpus to secure the future of your family, you may start a mutual fund SIP using a mutual fund app and continue investing until your investment objective is achieved.

Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.