SIPs small but sure investments for your overall future financial security

We can get returns in long term by investing small amounts regularly. For this, mutual funds are offering systematic investment plans (SIP). Every journey has a destination. SIP plans should be chosen to serve a specific purpose. We make expenses for our needs. To earn back some of this, the SIP investments will be immensely useful. Let us take a look at how.

Hyderabad: What about our future if we spend all money as we earn? How can we achieve dreams like financial security and own house? Everybody faces this problem. As they say, where there is a will, there is a way. You should cultivate a habit to save a small amount out of your monthly earnings with an unfailing regularity. Insurance premium, house loan interest and all such commitments are expenditure. A major portion of this can be recovered by investing a small portion of our earning at a regular frequency.

Many people think systematic investment plan (SIP) is like investing in a mutual fund. It is true but not the only way to make such investments. We can make regular small investments in market-delinked sources like bank deposits, Sukanya Samriddhi Yojana, Public Provident Fund, etc. Such SIP investments can also be made in shares, index ETFs (exchange traded funds), gold funds, etc. Depending on your financial needs and capability, these plans should be chosen. While making this choice, don't forget to assess your capacity for risk, expected income and objectives.

We should begin making investments as soon as we start our earnings, which we should continue till our retirement. If Rs 1,000 is invested per month for 30 years, we can get Rs 1.4 Cr after 30 year at 18 percent annual rate of interest. Thus, everyone can become a millionaire. The strategy behind SIP plan is to invest a surplus small amount systematically over a period of time. Specific financial objectives should be linked to it so as to make these investments uninterruptedly. Fixed goals should be set for children's education, own home and retirement fund. One SIP for each of these goals or one single high value SIP to meet all these can be taken. Premium paid towards term and health policies for over 20 to 40 years is expenditure for us. To get it back, you should make SIP investments with an amount equal to at least 5 to 10 percent of your annual premium.

Home loan interest is lower but it is also a burden because of the long 20 to 30 years duration. If you pay Rs 18,000 EMI at 9 percent interest for 20 years, total interest comes to Rs. 23.18 lakh. Interest and principal put together, it comes to Rs. 43.18 lakh. If you make SIP investment in 12 percent income plans with an amount equal to 10 percent of EMI (Rs 1,800 to Rs 2,000), after 20 years, you get Rs 18 lakh to Rs 20 lakh. Like this, a major portion of interest can be reclaimed. Even when we buy expensive appliances, car, bike and the like, we should take suitable SIP plans to compensate for such spending.

Remember, safe investments have to be made in plans that give more returns over and above inflation. Second income has to be created through investment. Life insurance plan for the income earner and health insurance for whole family are a must. Contingency fund for 3 to 6 months is needed. Spend only when it is compulsory. Postpone if it is just your wish. Don't trust deceitful advertisements. Avoid impulsive investments. Begin investing early, pay regularly and for a long term. This paves the way for your financial success.