Getting the most from mutual fund SIP requires beginning the investment process early in life and sticking with it over the long term. Starting early can do wonders for your corpus, particularly when saving for retirement. But before you understand the calculations on how saving for retirement can benefit you, let’s first know what is SIP and how it works.
What is Systematic Investment Plan?
Systematic Investment Plan (SIP) is an investment vehicle offered by many mutual funds to investors that enables them to make regular, little or rather large investments. Typically, investments are made on a weekly, monthly or quarterly basis.
(Also Read: From withdrawal rule to Rule 144 to increase money four times, here are 7 golden rules of investing)
How does SIP works?
SIP works by making fixed investments at predetermined intervals. With this, an investor can invest without fuss and without having to time the market.
For instance, assuming a 12% return, a person would only need to invest Rs 8416 every month starting at age 20 in order to receive Rs 10 crore when they retire at age 60. With age, the SIP amount needed to accomplish the target of Rs 10 crore would rise. For example, if you begin investing at age 25, you would need a SIP of Rs. 15,396 to have Rs. 10 crores at retirement.
You will have a variety of alternatives for using the retirement corpus to generate a monthly income flow for your requirements when you retire. You can either store the money in a bank FD or buy annuity plans from life insurance firms, such as the LIC New Jeevan Shanti Plan.
