For over a decade now, mutual fund houses have been spreading the message about how systematic investment plans (SIPs) can help an investor achieve all of life’s goals, be it short term (a few months to a couple of years), medium term (2 years to five years) or long term (more than five years). The efforts have shown good results with the latest industry data showing that monthly SIPs are now more than a crore in number. Beyond the numbers too such efforts have shown results, although in a slightly misguided manner: At times investors who are not well versed with the investing process, are heard saying they want to invest in stocks, gold, SIPs etc. The missing link here in that these investors think SIPs are a new kind of financial assets. While the reality is that SIPs could be described as the bridge to invest in some kinds of financial assets that an investor could invest in to meet hisher life’s financial goals.
Investors can start SIPs in equity, debt and gold schemes of fund houses to realise their short, medium and long term financial dreams in a smooth manner
For example, one could invest in bonds through an SIP in a bond fund.Likewise you can invest in equities through an SIP in an equity fund, and for investing in gold you can take the SIP route in gold funds. What’s more, you can take the SIP route to invest to achieve short term goals like paying your child’s school fees on a quarterly basis to long term goals like planning a retirement corpus for yourself. Also finan cial planners and advisors say that for investors with a regular and steady stream of in come, investing through the SIP route is a huge blessing. Through SIP such an investor can match hisher investments with the income stream in a steady and regular manner. It means that as you get your salary every month, through the SIP route you can also invest every month to achieve your financial goals without so much extending your monthly budget.
Over the years, innovations in technology in the banking and financial services space have made it easier for fund houses to offer investors the option to invest in all the three types of funds__equity , debt and gold funds__for meeting their financial goals which could be a few months into the future to several years.
An investor can set up several SIPs in a combination of equity, debt and gold funds for meeting their life’s various financial goals. In other words, an investor is now able to put in place a financial plan for every stage of life, called life stage planning, using SIPs in different types of mutual fund schemes (see table below).
Investors with varying risk-taking abilities can use SIPs in various mutual fund schemes to serve their purposes.
For example, if you prefer to take minimal risks and keep your savings in fixed deposits, you can use debt funds. On the other hand, if you are willing to take some risks and have time on your side, you can invest in equity funds through the SIP route.