SIP – Stay Invested with Goals

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 4-5 lac you start desiring for a vacation abroad. Your next level of accumulation of 10-15 lakh aspires you to go for a swanky car and anything more than 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 Amount	SIP Start Date	SIP End Date	Total Investment Amount in 11 Years and 1 Month
Rs. 10,000	01/07/2007	01/07/2018	Rs. 13,30,000

Category	Scheme Name	Current Value	CAGR	If Rs. 2 Lakh Withdrawn on 15th June 2009	Current Value	XIRR
Large Cap	ABSL Frontline Equity Fund (G)	30,06,790	15.86%		23,32,471	13.95%
Mid Cap	HDFC Mid-Cap Opportunities Fund (G)	43,67,588	23.93%		31,17,928	19.21%
Small Cap	Franklin India Smaller Cos (G)	44,48,600	24.35%		32,71,944	20.07%
Diversified	Franklin India Equity Fund (G)	31,20,421	16.64%		23,91,805	14.41%

Data till 16-July-2018. SIP Date has been considered 1^st of every month.

Example 2:

Scheme Name	SIP Amount	SIP Start Date	SIP End Date	Investment Amount
Reliance Growth Fund – Regular – Growth Plan	Rs. 10,000	15/08/1998	15/07/2018	Rs. 24,00,000

Current Value	Rs. 3,70,01,271	If Rs. 30 Lakh Withdrawn on 1st Jan 2009	Current Value	Rs. 2,20,69,867
CAGR	31.48%		CAGR	25.35%

Data till 27-July-2018. SIP Date has been considered 15^th of every month

The above instance of withdrawal both Rs.2 lakh and Rs.30 lakh is meant to fulfill some aspiration which certainly disturbing the accumulation what you have targeted for. In 1^st example withdrawal of Rs. 2 Lakh costs Rs.7-12 lakh of accumulation and in 2^nd instance withdrawal of Rs.30 lakh has dented the accumulation by 1.5 Cr.; looking back one would certainly feel hurt as it would affect your 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 fund which certainly has 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