Individuals as well as corporate can set aside some amount every month to meet periodic outgoes, which are short term in nature. The same could be done for meeting long-term goals as well. Here, we discuss some examples.
How to Calculate MFs SIP's Amount
As an individual investor, you can use SIPs to accumulate some amount every month to meet your expenses for your family vacation that you aspire to every two years. For example, suppose you put in Rs 10,000 each month through an SIP in an income fund and you get an average annual return of about 10%. So at the end of the two years, when you are ready for your family vacation, you have a corpus of about Rs 2.67 lakh. As a person who is in charge of finances at a small manufacturing unit, you need to pay advance taxes every quarter. Here, you can use an SIP in liquid schemes of good fund houses for your quarterly payments. For example, if you have an advance tax payment outgo of about Rs 3 lakh for the next quarter, you can put in Rs 1 lakh each month in the SIP so that, at the end of the third month, you have a little over Rs 3 lakh. Or you can put in Rs 99,000 in the SIP and have just about Rs 3 lakh.
Here, we are assuming a return of 8% per annum for the liquid fund -a conservative estimate given that in the last one year most liquid funds have given higher than 8% return. Corporates can use this for service tax payments, dividend and employee bonuses, according to financial planners.
One can use SIPs in equity funds for building a long-term corpus for retirement planning, child's higher education, wedding, etc.
Most fund houses tell their customers to go for SIPs in equity funds for building a large corpus for the future. Here, other than discipline, the compounding impact of investing over several years also kicks in, which ultimately brings in a large sum of money for the investor. Most of the top mutual fund houses have SIP calculators on their websites. Make use of these tools to plan your SIP for each of your life's goals. You can use those calculators to get a good idea about the amount you need to save every month, how much corpus you need for your long-term goals, etc.
Also, since there could be some tax implications relating to these investments through SIPs, may be you can seek some professional help from financial planners, advisers and or tax consultants.