SIP your way to Financial Health

All of us want to become rich or should we say richer. Whatever we say, we need to grow, be it business, job or money. But sometimes it remains stagnant and the last few years were such a period for the financial markets. Inflation has been going up but the markets have not been giving us returns. So it was the small investors like us who were losing. I know those who had invested in the stock market have just been waiting to get out of the market.

There are some who have redeemed their investments at a loss and the same persons have started investing again as they see the market going up. This pattern of investment does not make money for us, we only lose. But what about those who had invested through Systematic Investment Plan (SIP), they have a different story to tell, they have actually made money. Surprised! Well don’t be, they actually did earn pretty well.

Though many of us know that we can money through SIP, we are very short sighted and start calculating returns with just a few months of investment. We have long term goals but we are short sighted when it comes to investment. The moment we see the market going down we stop our SIP’s, which is wrong. In fact we should continue and you would get units / shares cheap and help in averaging our investment costs.

In fact when the markets pick up, the value of your investment just goes up. SIP of course is not the best way of investing, but it helps in inculcating investment discipline and takes away emotions away from investments. Getting emotional is not good for investment, but intelligent investment is good. In the way we go about we do not have the time to do research and do intelligent investment. Hence discipline in investment is the next best bet.

Starting a SIP is not difficult, in fact every mutual fund has this option, even banks have this option for investing in shares as well. If you plan to invest through SIP in Shares, your research should be good. If not mutual funds are your best bet. Having said all this, we should review the SIP which we have started at regular intervals to ensure that it is giving us the returns we were looking for. I would say reviewing whether to continue or not in a particular SIP should be done once a year.

If after a year you feel that the SIP is not giving you the return you were looking for and find that there is another scheme which would meet your needs, switch. So all the best and SIP your way to financial growth.

When is the right time to start Saving?

Anytime. Yes. But the earlier you start the more the savings. Those who did not start saving at a early age, will vouch for it. They realize the strain. With some savings in hand, your mind is usually at peace, knowing that in case of problems you can fall back on your savings. This brings about happiness. Have you seen people around you grumpy and sad all the time, there are many such persons. Take a closer look, they don’t have any savings or their savings are would be low.

Why did this persons not start saving, there could be multiple reasons. When they were young and they started earning, they wanted to make the most of their money and started spending on needless pleasures and increased their consumptions. There were others who spent just because their friends were spending and they wanted to keep up with them.

So what happened, savings took a backseat, saying we are still young and we will save later. But as you grow, different pressures will keep coming up viz. Marriage, house, kids, their education, etc. This will never allow you to start your savings, so this is the time if you have not started, however small, bring in some discipline to start enjoying your life and getting happier.

Many persons just delay waiting for that time of the year, when they expect a bonus or for the markets to fall or for the price of gold to fall. There is no right time; every time is the right time. Start your savings, you might make some mistakes but you will learn and improve. There are many books and papers available to tell you where to put your savings, everyday.

So the earlier you start, the chances of you making money improve, since you have the time to learn from your mistakes. But if you start later and make a mistake, you will not have time to recover. Also if you keep saving small amounts over a period of time, the chances of losing money will reduce, than when you do it in one go. Saving over a period of time, helps in compound your savings.

It is best to start savings when your responsibilities are less, as we grow, our responsibilities will start increasing. Till now we were just saying saving, but what do you do to the saving, you invest. Proper investing will help your money grow and it would grow only if you invest properly. If you do not invest, Inflation will eat into your savings. What do I mean here?

Inflation means rising prices, so if you leave your savings as they are without investing, the saving will not be enough. This is another reason to invest and get a return higher than the rate of inflation. Another reason to save and invest is, you have only certain earning life, so the saving is more to take care of your retirement. Hence the earlier you start, the more comfortable your retirement.

Retirement is not the only goal in life; it is the long term goal. So the earlier you start, a smaller amount can be set aside for this goal. The best thing to do is make a list of all the goals you have to achieve and how are you going to fund them. List all short term, medium term as well as long term and start allocating your savings to each of these goals.

But before you start investing, there are some expenses which would come anytime which could eat away your savings, so first get a health insurance in place and pay off all your debts. Especially all non asset generating debts.

All the best. Start investing.