Mutual Fund SIPs - Not Age Dependent
9/26/2011 4:46 PM Monday
. I am a 45 year old government servant, and have some investments in the form of FDs and shares purchased over a period of time. Is it a good idea to start off with a systematic invest-ment plan at my age? If yes, what would be the ideal amount I should be setting aside each month? My monthly savings as of now, excluding all my responsibilities, comes to around Rs 15000
- Amit Tandon Bhatinda
A. The concept of systematic investing is not related with age. Whatever your age is, if you have savings and want to invest them wisely, the systematic investment plan (SIP) is relevant. An SIP helps in multiple ways. It helps inculcate discipline by committing you to a monthly investment, which you may have otherwise neglected. Secondly, when you are investing in a category such as equity, where markets fluctuate a lot (volatile), the SIP ensures that you are investing over extended periods of time, through all market cycles, and hence buying at all levels of the market – high, low and in-between. This results in what is called averaging of cost, and makes you the eventual winner. You can initiate an SIP in debt, equity or hybrid (a mix of the two).
You can find below, a chart illustrating the performance of a leading Indian equity fund. An SIP of Rs 5000 per month initiated in January 2000 would have resulted in a portfolio value as high as Rs 42.39 lakhs by March 2011. That is about 26 per cent compounded return per annum, which is no mean performance. This performance is also due to the fact that the SIP continued through the terrible low points of 2008 and 2009. This highlights the principle that investors must not stop their SIP when markets have fallen, or be caught up in pessimism or fear, for when else do they get the chance to buy low?
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