The Systematic Investment Plan, famously known as SIP, is a disciplined way of investing in mutual funds. But before investing, one must always keep inflation in mind while making an investment and then fix the investment goal.
What is SIP?
SIP allows an investor to put in a fixed amount of remuneration at pre-defined intervals in the selected mutual fund scheme. This amount can start from Rs 500, and the pre-defined SIP intervals can be on a weekly/monthly/quarterly/semi-annually or annual basis. This scheme provides benefits in the long term due to the average cost and the power of compounding.
A retired person needs around Rs 40,000 per month if he/she belongs to a middle-class family. In such a scenario, if the inflation growth is at 6 to 6.5 per cent per annum, the monthly Rs 40,000 expense is expected to go up to around Rs 2.5 lakh per month after 30 years or post-retirement. SIP is advised to every working individual in order to secure their life after retirement.
How much SIP will be required to get 2.5 lakh monthly?
– In order to get Rs 2.5 lakh monthly from the SIP investment, one requires Rs 5 crore at the age of sixty, said Pankaj Mathpal, Founder & CEO at Optima Money Managers, as reported by Live Mint.
– If the investor starts investing at the age of 30, then by the age of 60, he/she will have 30 years for investment and create around Rs 5 crore corpus.
– Mathpal told Live Mint, “However, keeping the risk appetite of an investor in mind, I am keeping the least possible mutual fund SIP return of 8 per cent and an annual step-up of 10 per cent. An investor will have to start investing with 11,000 in monthly SIP for the next 30 years.”
– Even after investing in the SIP schemes, an individual must invest the amount in SWP for the next 20 years. If the inflation rate is 6 per cent and a return of 8 per cent post-retirement, it can be expected that one can get Rs 2.5 lakh per month for the next 20 years using a 4 per cent withdrawal from the SWP.