SIP - The Smart Investor's Preference

It is about 10 years since we moved into our new house and one of the(important) things that we neglected was our garden. It was in a mess. For the last couple of  months we have been working to improve and organise it and finally we are successful. Soon we realised that setting it up was the easy part, what's difficult was to maintain it. Especially watering a variety of plants, almost on a daily basis required both time and effort. Fortunately we came across 'Drip Irrigation' - a method mostly used by large farms where watering the crops is a herculean task and the costs involved are also quite high. 

What Drip irrigation does is, it slowly 'invests' water in the plant drop by drop thereby reducing wastage and saving valuable time and effort. It also brings a lot of discipline, as each plant requires different amounts of water and you can actually preset the drips to obtain desired water levels.


Finally, from the lap of the nature to the world of personal finance.

How to effectively use SIP for your financial Goals.

Step up the SIP on a yearly basis. 

Although SIPs allow you to invest a fixed sum every month, it does not mean you stick to this amount over the entire tenure. As your income rises, your savings will also go up. The SIP amount should also increase in the same proportion. The surplus savings need not be directed to an SIP in another scheme. Instead, you can simply increase the allocation towards the existing SIPs.

Use systematic transfer plans:

When you have multiple SIP's running at the same time, keeping track of the outflow and ensuring availability of funds can become a tedious task, especially if you are using different accounts. Maintaining a high balance in the savings account is not advisable as it does not fetch very high returns. A better option is a systematic transfer plan (STP).

Under this, the investor puts a lump sum in one scheme and gives instructions to transfer a fixed amount to another scheme at regular intervals. The lump-sum investment is usually in a debt fund and the destination is usually an equity fund. Typically, carrying out an STP from a liquid fund to the chosen equity funds is advisable.

SIP is like Drip Irrigation, you need to slowly invest, maintain discipline and command patience, so that your investments can grow and meet your financial goals. And don't forget, SIP is perhaps the best available asset allocation tool too. 

"बूँद बूँद  से घड़ा भरता हैं "

Ninad Kamat CFP^{CM
www.letsmakeaplan.in}
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