Is your Systematic Investment Plan (SIP) really helping you?

Are you investing in equity mutual funds through the SIP route? Great...That means you believe in its benefits:

• You do not have to worry about the 'right time' to invest. 
• It is a disciplined way of investing.
• It helps to de-link emotions from the investing process.
• Stock market volatility could work to your advantage. 

However, merely starting an SIP is not enough...

If you are an investor who...

• Invests a random amount, without giving it much thought.
• Who is fixated with 'round figures' (say, ₹ 2,000 per month), merely because it is convenient.
• Is not clear as to why you have commenced the SIP.
• Does not take inflation into account.

Then, it is time to review your SIP.

Here is a check list

• Determine the goal first. Do you begin your journey without knowing the destination? Similarly, beginning investing without knowing why, is not advisable. Example of a goal: Your child's MBA course, seven years from now.
• Determine the current cost of the goal. Suppose it ₹ 10 lakhs.
• Check out the approximate rate of inflation for education. Say, it is 10% per year.
• Based on this, arrive at the cost in 2023. This will amount to around ₹ 19.50 lakhs.
• Estimate the annual rate of return. Say, this is 12% per year.
• Based on these figures, a simple calculation in a spreadsheet will reveal that the correct monthly SIP instalment will amount to ₹ 14,900/-.
• Review these figures once a year.

Calculate the right amount for your SIP

To use this calculator, please left click on the slider below and drag to the right till you reach the desired amount/number.

Remember: It is important to invest the right amount. Investing blindly without estimating the right amount will only lead to disappointment in the future.