Aiyappan V R CFA


SIP Investment

“SIP of Rs 5000/ – started on 1st July 2010, has become Rs 18.84 lacs as on 1st July 2021 (Actual Figure)”

What is SIP?

SIP is a short form for Systematic Investment Plan, As the name suggests, it is a method of regular investments. Like when u invest a Fixed amount every month in a Mutual Fund Scheme, it is called a SIP.

Where to Invest SIP?

It is advised to start the SIP in a Diversified Equity Fund, for better long-term growth. Systematic Investment Plan works on the principle of SNOWBALL theory – the longer you go, the bigger it grows. Volatility is the food for Investing.

How to open a SIP Account?

Opening a Systematic Investment Plan account is very simple. You just need to check if you are a KYC compliant, and then sign an ACH mandate with your MF Distributors, for monthly deduction of the SIP amount; that’s it!



Systematic Investment Plan is a very convenient method of investing in mutual funds through standing instructions to debit your bank account every month, without the hassle of having to write out a cheque each time. Currently, mutual funds have 3.73 crore SIP accounts through which investors regularly invest in Indian mutual fund schemes.


SIP is nothing but a piggy bank! You should assign all your SIP to your Financial Goals, like home painting, Foreign Vacation, Social Gifting,  for Kids education etc. This will help you maintain the discipline of investments and inspire you to save.


Always check your estimated future Value, before starting a Systematic Investment Plan; I have given below the reference table of Rs 1000/- per month at an assumed rate of 12% p.a*, just for your help.

Tabular Table SIP

*Note: Above the table is just a ready reference for your help. 12% p.a is just an indicative return, taken for the purpose of calculation. The actual Average ROI of Top 5 Diversified Equity funds is 18.5% p.a, in 20 Years period.


Always allocate your Systematic Investment Plan according to your target period and Liquidity requirement. Like, if you want to start a SIP for a shorter period (< 5 years), they prefer a large Cap or Hybrid Fund, and if you are looking to start investing for a longer period (7-10 years or more), you can select Midcap or Small-Cap Funds. I have given below the real historic chart of some of the long-term SIPs in Indian Equity Mutual Funds:

One can see the advantage of investing over the long term – An investment of Rs 5000 per month has been converted to huge wealth if you have kept the discipline of investing.

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Ramesh aged 35 Years, an IT professional, has an annual income of around Rs.15 lakhs. He lives with his spouse, a homemaker, and a daughter of 4 years age. One of his close friends, Suresh, met with an accident. The hospital bill came to Rs. 3 lakhs and unfortunately Suresh did not have any insurance. To foot the bill, he had to close his bank FD. This FD was earmarked to fund his child’s educational needs, which is not a possibility now. His child’s educational needs remain underfunded.

Suresh was the sole bread winner of his family and was asked to take complete rest for four months. This is a double whammy for people like Suresh – one being uncovered medical expense and another being loss of income. Suresh was rightfully worried as to how he would manage his family expenses for the next four months without any income. Looking at the situation of Suresh, Ramesh felt its high time, he takes up insurance cover. But he was not sure what kind of risk he is exposed to and how does he go about estimating and managing his risk?

So, let us analyse the above situation and understand how to “Cover Your Risk

Step 1 – Cover Your Risk – Life Insurance

Ramesh is a very energetic and positive person; he takes good care of his health and strongly believes he will live longer. But let’s be realistic, death is certain and only the timing is uncertain. Ramesh has another 25 years of work life. Assuming he will earn the current income for the next 25 years (without taking any growth), he has the potential to earn Rs 3.75 Crore (Rs 15 lakhs/year X 25 years). Ramesh should take coverage of Rs 3.75 Crore to protect the income loss for the family in case of his demise either natural or accident. So, let’s see the different kinds of products available in life insurance for Ramesh to safeguard his family’s financial position in case of his demise.

  • Term Insurance — Term insurance is a pure risk cover and a very good product. The premium would depend on age, health condition, and other factors. This product gives very good coverage for a very small premium amount, for example, it would cost approximately Rs 35,000 per annum for Rs 1 crore coverage, and if he pays a premium of around Rs 1.30 lakhs he will get a coverage of Rs 3.75 crores.
  • Insurance cover + Savings (Conventional product/Non-market linked) — These products specify the returns for the investors which can be either fixed or variable. The coverage varies between 10 to 15 times the premium. Here Ramesh shall pay a premium of Rs 1 lakh per year, to get a coverage of Rs 10 to 15 lakhs. In the case of his demise, the family will get an amount between Rs 10 to 15 lakhs. It is equivalent to Ramesh’s one-year earnings. How can his family survive on this amount for the rest of their life? It is not possible. So always treat this product more like a savings product and less as an insurance product.
  • Insurance + Investment (Market Linked or ULIP) – ULIP products are the flavour of the day, it is an investment product that invests in Equity & Bond market. The investment return depends on the market performance and the re-balancing strategy you deploy to move funds between bond and equity markets. In terms of coverage, it’s like a savings product where the coverage varies between 10 to 15 times the premium. If Ramesh pays Rs. 1 lakh premium, the coverage would be between Rs. 10 to 15 lakhs. So, again this is more of an investment product and less of an insurance product.

Step 2 – Cover Your Risk – Health Insurance (Disability Cover) – Income loss due to sickness or accident

Ramesh, realized life insurance will only cover for death; but what if Ramesh falls sick or meets with an accident which might reduce his earning ability?

Accidents could be the reason for loss of income
  • Critical Illness Cover—Health Insurance companies offer critical illness cover policy. Critical illness products cover pre-specified critical illnesses. In case the policyholder is diagnosed with any pre-specified critical illness under the policy, then the policyholder will get the sum assured or pre-specified amount. This can be used towards the hospitalization expenses or can be invested to create a regular source of income.
  • Personal Accident Cover (PAC)—Personal Accident Cover can offer financial support in case of loss of income due to accident. Ramesh can get a PAC for Rs 1 crore at an approximate annual premium of Rs 8,000. In case Ramesh meets with an accident and it leads to either disability or death, based on the extent of disability he will get compensation. This can be invested and that can offset the income loss due to disability either fully or partially.

Step 3 – Cover Your Risk – Health Insurance – Hospitalization Expenses due to sickness and accident

Health cost in India is on the rise. A report by Mercer Marsh Benefits said the forecasted Medical trend rate will be 10% in India, higher than the general inflation. Ramesh, when he heard Suresh had to close his bank FD to make the payment towards hospital expenses – he could see that happening to him too if he fails to take adequate cover. If he opts for a family cover (himself, spouse & child) of Rs. 10 lakhs for hospitalization expenses, it would cost him close to Rs 20,000-25,000 per annum. But he can have peace of mind, that in case of medical emergency he does not have to sell his investments, assets or borrow money.


Insurance is one of the most important financial products which mostly gets lower priority compared to other products. Buy an insurance product with the primary objective of covering risk and not for returns or tax benefits. If you can pen down five friends or relatives, who will financially support you and your family for the rest of the life, in case of your income loss due to disability or death, then you don’t have to consider insurance. If you cannot pen down the names, then insurance is a product you should look at seriously and Cover Your Risk.

The COVID-19 pandemic cases are increasing globally, and the number of confirmed cases in India has crossed more than 1.5 million. COVID-19, which started as a health concern, with continued lock-downs and social distancing, normal business activity has taken a back seat leading to economic slowdown. The International Monetary Fund (“IMF”) in its latest report projects the global and Indian economy to contract by 4.9% and 4.5% respectively in 2020.

The pandemic has made a difference in each and every one’s life. Positive changes include – individuals becoming more health conscious, more quality time with family and children, slowing down from their busy life schedule and taking life easy, becoming more technology oriented. Negative changes include heightened fear on health, job safety, and financial stability.

Now let’s look at real life cases of how the pandemic has affected the financial position of individuals

  • Mr Kumar is a website designer and digital marketing professional in Mysore. His monthly income more than doubled over the last three months.
  • Mr Bharath, an IT professional in Bangalore – had to take a pay cut of 20%
  • Mr Ram, who owns a fast food restaurant in Bangalore, had closed his business for three months. But he still managed to pay the rent and staff expenses from his personal savings
  • Mr Chandan, who was working as a travel consultant, has lost his job and is searching for new job.

Loan moratorium is helping individuals manage their cash flows; however the financial situation could worsen after the moratorium period ends. Many have lost their jobs or taken a pay cut in this on-going pandemic, exposing the financial vulnerability. Individuals who had a financial plan in place, would be in a better position to weather the storm, while those who did not have a right financial plan would be under financial stress.

Boost your Financial immunity at COVID Times

Key principles of personal finance are simple and effective, but many don’t follow the same as it requires a lot of discipline. Here are some of the key principles which can help boost financial immunity during current times.

  • Boost Your Income—COVID has changed the way businesses operate. We might witness a structural shift in certain sectors and industries. Individuals who have lost their job or who have got a pay cut should be cautious as the demand for their skill set is reduced or has become obsolete. So they should hone new skills which can make them more employable.
COVID Times: Boost Your Financial Immunity
Best time to develop a new skill
  • Never depend on single income —Make investment income your second source of income.  During good times, you need to save for your rainy days. Have a target saving every month, so that you will be well prepared for the future
  • Keep your expenses under control—COVID has brought in forced discipline. Many used to spend Rs 4,000-5,000 on a weekend pre-COVID, so their total spending was close to Rs.20,000-25,000 over weekends in a given month. Now all this unnecessary weekend expenses have drastically reduced. It would be better, as we get back to normal—to cut down unnecessary expenses.
  • Have a health insurance—COVID being a medical crisis, an individual is exposed to health risks. In an unforeseen event of hospitalisation, the financial burden can be significant. It’s better to take a decent health insurance cover, so that the financial risk would be reduced to great extent. You can even think of topping up your current health insurance limits. Most of the insurance companies have come up with top-up policies specifically for COVID times.
  • Avoid getting into new debts – During uncertain times, loan or debt can hurt very badly. It’s better not to take any new loan or debt. Also be wise in using credit cards. In this environment, it is easy to come across a lot of offers and discounts which might entice us to use our credit cards or get into debt. It would be better to postpone purchase, instead of getting into a debt trap.
  • Build an emergency fund – Three to four months of expenses as emergency fund which will come in as handy during tough times.

Conclusion :

An economic slowdown can significantly affect the financial position of an individual. The basic principles of personal finance though simple, need lot of discipline to be on track. Please remember the current economic slowdown, is just one of the slowdowns; We might have to see more in the coming years. If you were not well prepared for the on-going slowdown, you can start building your financial immunity with the above-mentioned key pointers.

Retirement Planning is one of the most important and expensive financial goal. An individual can get loans for other financial goals like buying a car, house, kids’ education etc. but he cannot avail any loan for meeting any shortage during his retirement.

I have come across many individuals who had decent earnings during their working years and they did pretty well when it came to saving and investment, however as they approached retirement they had very little retirement corpus and they ended up compromising on  their life style post retirement planning or became financial dependent on kids

Let us understand why an individual generally falls short of his/her retirement goals and the realization happens when he/she is on the verge of retirement.

Let me tell you a story of one Mr. Kumar and his retirement planning or his non-existence of it; He had a happy family with two kids. He had a good earning; he saved and invested his money in a diligent manner. He bought a car and a house by taking loan and dipping into his investments. Then he had an EMI to pay ; any excess savings he could manage on a monthly basis was used prepay the loan. This routine was followed closed to a decade and debt reached a manageable size. Meantime, the next challenge surfaced – carrying a huge price tag – children’s higher education. So Mr. Kumar again dipped into his savings and funded the education. Every Indian parent’s responsibility will not end with funding the education of their kids. A decent wedding is a must and not an option in most cases. Mr. Kumar, the hamster, got back on the wheel and started saving for their marriage and got them married. Mr. Kumar’s clock was ticking with equal speed – he reached a ripe old age, in terms of work life, of 56 years. Now he was barely left with 4 years more of productive work life, during which he has to make enough savings which can support his retirement life of 15-20 Years, which was as impractical a goal as they came. Many of us can relate to the situation of Mr Kumar.

College education can be very expensive

What went wrong in the way Mr. Kumar handled money? Lets analyse a bit;

He was myopic ; He was focusing on his next set of short term goals which came at the cost of long term retirement goals. So many individuals get into this trap, where they try to achieve the next nearest financial goal with all the available financial resources. They feel very comfortable as they keep achieving the goals on hand and finally when they are close to retirement date, they realize they are totally off track from the biggest and most expensive goal of their life.

The realization of not having enough savings and investments came very late. At the end he was left with not so very desirable options :

  • Postpone the retirement date for few more years.
  • Compromise on the life style post retirement
  • Depend on their children for financial support

Mr. Kumar, had he penned down all his financial goals and invested accordingly since initial days, the probability of achieving all of them would have been high. The key factor is having a goal in place and then investing to achieve it – it’s called Goal Based Investing.

Benefits of Goal Based Investing in Retirement Planning

  • Investing with a clear focus on the financial goals (children’s education,marriage, medical emergencies & retirement planning) helps to achieve them in an effective manner.
  • Helps you select suitable Investment Asset Class (Equity, Bonds, Real Estate, Gold) based on the time horizon and nature of goals.
  • Increases awareness on underfunded goals and unfunded goals : This visibility helps an individual to take effective action in bridging the gap during his working years.
  • Even if a goal is not funded, individual will have realistic expectations.

Keep visiting this section – we will continue to post articles to help you plan for your financial goals. If you want us to cover any area specifically, do leave a comment below. Our experts will be happy to cover them in the next articles.

Key Takeaways

Chart out all your financial goals with clear timelines

Create an effective financial plan for achieving the same.

Remember – Investing without goals is like travelling without destination.