SIP - Invest for the Long Term Gains!
Many
investors have made SIP as part of their financial plans for accumulation of
wealth, but not necessarily linked to their goals. This is the common mistake
we all commit which does cost us dearly. The goalless SIP is always eyed as the
available wealth for every need in journey of life. As you notice a desirable
wealth gets accumulated you get tempted to encash the accumulation to meet your
immediate needs or luxuries. For example, when it reaches say Rs. 4-5 lac you
start desiring for a vacation abroad. Your next level of accumulation of Rs. 10-15
lakh aspire you to go for a swanky car. Anything more could lead you desire for
building a physical asset which might or might not appreciated as your SIP
would. This is because compounding effect beyond 14 and 21 years is many folds
and you may certainly lose the benefit of that as compare to return from
acquisition of new physical asset.
Example 1:
Monthly
SIP of Rs. 10,000 started on 1-July-2017 would give the following outcome:
|
Category
|
Scheme Name
|
Investment
Amount
|
Current
Value
|
CAGR
|
|
Large Cap
|
ABSL Frontline Equity Fund (G)
|
14,00,000
|
30,25,915
|
14.03%
|
|
Mid Cap
|
HDFC Mid-Cap Opportunities Fund (G)
|
14,00,000
|
43,67,588
|
20.12%
|
|
Small Cap
|
Franklin India Smaller Cos (G)
|
14,00,000
|
40,44,474
|
19.81%
|
|
Diversified
|
Franklin India Equity Fund (G)
|
14,00,000
|
31,32,038
|
14.70%
|
|
Category
|
Scheme Name
|
Investment
Amount
|
Current
Value
|
XIRR
|
|
Large Cap
|
ABSL Frontline Equity Fund (G)
|
14,00,000
|
23,62,538
|
12.30%
|
|
Mid Cap
|
HDFC Mid-Cap Opportunities Fund (G)
|
14,00,000
|
29,51,304
|
16.12%
|
|
Small Cap
|
Franklin India Smaller Cos (G)
|
14,00,000
|
29,92,108
|
16.35%
|
|
Diversified
|
Franklin India Equity Fund (G)
|
14,00,000
|
24,16,645
|
12.69%
|
Cost of Rs. 2 Lakh
withdrawn – Rs. 7-12 Lakh
Data till 28-Feb-2019. SIP Date has
been considered 1st of every month. Partial Withdrawal date is
considered 15th June 2009
Example 2:
Result
of Monthly SIP of Rs. 10,000 in Reliance Growth Fund – Reg – Growth
|
SIP Start Date
|
SIP End Date
|
Investment Amount
|
Current
Value
|
CAGR
|
|
15/08/1998
|
15/02/2019
|
Rs. 24,70,000
|
Rs. 3,48,75,613
|
28.76%
|
|
SIP Start Date
|
SIP End Date
|
Investment Amount
|
Current
Value
|
CAGR
|
|
15/08/1998
|
15/02/2019
|
Rs. 24,70,000
|
Rs. 2,18,75,495
|
24.59%
|
Cost of Rs. 30 Lakh
withdrawn – Rs. 1.30 Crore
Data till 28-Feb-2019.
SIP Date has been considered 15th of every month. Partial Withdrawal date is considered 1th
January 2009
The
above instances of withdrawal, both Rs.2 lakh and Rs.30 lakh are meant to
fulfill some aspiration which is certainly disturbing the accumulation what you
have targeted for while starting the SIP. In 1st example withdrawal
of Rs. 2 Lakh has dented the accumulation by Rs.7-12 lakh while in the 2nd
instance withdrawal of Rs.30 lakh has dented the accumulation by 1.3 Cr. While
looking back, one would certainly feel hurt as it would affect the long term
planning.
It
would be prudent if one make provision for your short term planning through
SIPs in debt fund or any thematic equity scheme. (These are sectorial funds
which certainly have risk of not behaving positively if sector doesn’t do well
in stick times). The choice of the product depends on compulsion of fulfilling
the aspiration in given time. Therefore don’t mix your short term goals with
your long term goals as you may at the end of journey be left with nothing.
Disclaimer:
Past performance may or may not be sustained in the
future. Mutual Fund Investments are Subject to Market Risk. Please read the
offer document carefully before investing
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