Employees get a fixed salary every month. After accounting for their monthly expenses, they save some amount every month. Many of them choose to invest this amount into mutual funds, generally through systematic investment plans (SIP). These help in meeting their long-term goals, be it buying a house or sponsoring their children’s higher education or using the money for retirement purposes. For example, an employee who is earning Rs 1 lakh a month could save Rs 25,000 per month using systematic investment plans.
WHEN SHOULD ONE INCREASE THEIR SIPs?
Financial planners believe that investors should increase their systematic investment plans annually in line with rising inflation. Most employees generally get a salary hike every year. This hike is announced in the time period between April and June and is applicable from June onwards. Financial planners believe that a portion of this salary raise should be saved to meet financial goals, which should also account for rising inflation.
HOW SHOULD ONE INCREASE THEIR SIPs EVERY YEAR?
Investors can top up their SIPs every year either automatically by indicating their intent when making their first investment. So, while starting an SIP, investors could opt for the top-up option and decide to increase the amount by 5-10% every year. Another way of doing it is to wait and decide every year. Once you get your salary hike you could take a decision. For example, when the salary hike comes in April or May, you could take into consideration the amount of hike, take a look at your cash flows afresh and then decide to increase your SIP. You could either increase your SIP in an existing scheme or opt for another scheme as per your portfolio requirement. If you are overweight equity due to the rise in markets and have no allocation to debt you could consider a hybrid or debt fund, while if your allocation to gold is low, you could use a gold fund or opt for a multi-asset fund.
