It isn’t perfect. But an SIP is a small investor’s best bet at achieving her financial goals. And I am not exaggerating this aspect.
Most people start with a small amount – Rs 5000 or Rs 10,000 a month – to gain experience of regular investing. But as you also know, just investing Rs 5000-10,000 per month won’t help you reach your financial goals.
So, how should you decide your correct monthly SIP (systematic investment plan) amount?
Suppose you are a 35-year-old who earns Rs 1.25 lakh per month in-hand salary. You and your employer together also contribute a total of Rs 10,000 per month towards EPF. The regular monthly expenses are Rs 75,000 per month and, hence, you can invest Rs 50,000 per month from the surplus.
From this surplus, you had just begun investing Rs 10,000 per month in SIP and were parking the remaining money in random financial instruments.
There are few goals that you are targeting:
-Down-payment for house purchase (Rs 15 lakh after 5 years),
-Daughter’s higher education (Rs 50 lakh after 14 years), and
-Retirement (Rs 5 crore after 25 years)
Doing some financial planning calculations, you find out that you need to invest:
-Rs 19000-21,000 per month in 75-100 percent debt for 5 years to accumulate your downpayment of Rs 15 lakh for house purchase.
-Rs 14000-15,000 per month in 60:40 Equity:Debt for 14 years to accumulate Rs 50 lakh for daughter’s higher education.
-Rs 42000-43,000 per month in 60:40 Equity:Debt for 25 years to accumulate Rs 5 crore for your retirement.