Systematic Investment Plan
Building wealth in the long run is not just about chasing high returns, but by adopting a disciplined investment habit. SIP (Systematic Investment Plan) in mutual funds has today become the most preferred method for those who want to invest for long-term goals like retirement. If a little gold is added along with equity and the investment is maintained for a long time, even a small amount of money every month can create a huge corpus over time.
If you are investing Rs 24,000 every month. This amount is divided almost equally among six equity mutual funds Parag Parikh Flexicap, Kotak Multicap, ICICI Prudential Retirement Pure Equity Fund, Invesco India Large & Midcap, Motilal Oswal Midcap and Bandhan Smallcap. Each fund has an SIP of around Rs 4,001, due to which they are getting the benefit of different categories and investment styles. According to Pankaj Mathpal, MD, Optima Money Managers, the time period of 22 years is absolutely right for equity investment. However, there is always scope for improving the portfolio a bit.
Many investors have a question in their mind whether it is necessary to have a separate retirement fund for retirement planning or not. Experts say that in Rohit's case, ICICI Prudential Retirement Pure Equity Fund is a solution oriented fund, which has a lock-in of 5 years. The name may be a retirement fund, but in reality it is a diversified equity fund, which works like a flexicap. If the lock-in period matches your goal, then there is no problem in investing in it. The real thing is not the name of the fund, but the correct asset allocation and regularity of investment.
If we assume an average annual return of 12%, then your current SIP of Rs 24,000 can turn into around Rs 3 crore in 22 years. But in such a long time, inflation reduces the real value of money significantly. This is where the importance of step-up SIP comes into play. If the SIP amount is increased by 10% every year, then this investment can reach about Rs 6 crore in 22 years. Income generally increases with time, so increasing SIP should not be an option but an essential part.
According to experts, Rohit's portfolio is already well spread across largecap, midcap and smallcap funds. It is wise to stay in it for a long time, just a review from time to time is necessary. Investment in gold can be added to further balance the portfolio. Gold often provides security during stock market fluctuations. Gold fund or gold ETF—both options are fine. It would be better to start investing in gold with a small SIP of Rs 2,000 to 4,000 instead of investing a lump sum amount.
Starting early, maintaining investments for a long time and increasing SIP every year are the three strong pillars of retirement planning. Rohit is on the right track by starting an SIP of Rs 24,000 at the age of 34. If they maintain the 10% step-up and proper diversification, it is absolutely possible to build a strong fund for retirement.
