Systematic Investment Plan - Save Tax
Investments ... particularly when made periodically, known as Systematic Investment.
Systematic Investment Plan ... Particularly when made with a view to attain the better returns and to have at required time.
Do you like the idea of a bank balance of Rs.1 crore before you decide to retire from work? The crore figure is sure to tempt you but your worry could be how to build that balance. All it requires is a monthly savings of Rs.3405/-. Sounds too simple? That is if you stick to Systematic Savings and Investment habit at an early stage.
If you can save Rs.1500/- every month for 25 years, you can be a crorepati. Here we assume that the investment you choose gives you a return of 20%. Now you must be wondering how to get a return of 20% when bank deposits offer an interest rate of only 5-6%. If you want a hefty bank balance, you have to do some mix and match. You can't achieve your targets simply by putting money in a safe bank deposit. That also doesn't mean you have to risk all your savings by dabbling in the stock market for a high return.
If you are looking for 20% return, try and put 75% of your savings in an equity fund and stick to a fixed product for the balance 25% savings. For instance, even post office product gives an assured return of 8% at current levels. So generating the balance required returns from a direct equity investment or through an equity fund shouldn't be a problem. Equity fund in the last few years have generated returns of over 20%.
If you don't have the patience to save for 25 years, you can settle for a shorter period. But you should be willing to save more money on a monthly basis. It takes only 20 years if you save Rs.3750/- every month and it takes only 15 years if you save Rs.9750/- every month for a maturity amount of Rs.1 crore (at 20% compounded interest).
Now there are many who can put aside much more than these amounts every month. For them, the Systematic Investment Insurance Plans can only get even bigger. A monthly savings of Rs.2000/- can actually bloat up to Rs.1.36 crore and Rs.3000/- can actually bloat up to Rs.2.04 crore at the end of 25 years. Isn't the target tempting to think of Systematic Investment strategy?
