Freedom SIP Way To Go For Financial Discipline & Security

The famous existentialist Friedrich Nietzsche once said, “Freedom is the will to be responsible to ourselves,” and even today, more than 150 years later, this sentiment remains extremely relevant. As early as childhood, people begin to dream about a time when they would be free from the responsibilities of school, college, having to make their own decisions and the like. While starting a career does bring a semblance of freedom, it comes at a price—now one has to take care of their own bills, buy their own groceries, and try to save some money.

These can be considered as the responsibilities that come along with freedom and help people become more independent. Financial freedom is, undoubtedly, one of the key contributors in a person’s independence, so if you are in the stage of life where you are free and taking care of yourself, it is important that you make investments for the foreseeable future.

Boosting Discipline Through SIPs

Systematic investment plans, or SIPs, are among the most popular ways to invest in mutual funds. People prefer investing via SIPs due to a number of reasons, including the ability to start small and the potential to benefit from rupee cost averaging. This means that since you invest a fixed amount at regular intervals, you end up benefiting from times when the market is underperforming because the same amount of money allows you to purchase more units of the fund. In the long run, you will have a secure nest egg, without exerting too much effort or scrimping too much. SIPs also help inculcate financial discipline, paving the way for your eventual financial freedom.

Freedom SIP—an optimal way forward

If you are thinking of starting an SIP, or expanding your portfolio, consider opting for a feature like the Freedom SIP. This feature is an excellent way to invest your way to financial security. Freedom SIP echoes one of the famous thoughts of Warren Buffett: “unless you find a way to make money while you sleep, you will end up having to work until the day you die.” And nobody desires that. By investing through a feature like the Freedom SIP, you can unlock a potent source of supplemental income.

Once you hang up your work boots, you have the choice of deciding when you want to retire and how much you will need from your second income. Based on your retirement calculator and future plans, you can choose a systematic withdrawal plan amount and link it to your Freedom SIP. By doing so, you can start preparing for your post-retirement secondary income right away or even use it to supplement your regular income in a few years.

A ‘SIP of the Youth’

The beauty of the feature lies in the fact that depending on the selected SIP tenure, the SWP amount is available based on a pre-set multiple. Suppose you want a monthly SWP pay-out of Rs. 50,000 20 years from now, then you can invest a monthly SIP amount of Rs. 10,000. This is because SIP’s instalment multiplier for a 20-year tenure is 5X, making it Rs. 50,000. If the investment duration is stretched to 25 or 30 years, the multiplier applied is 8x and 12x respectively. In effect, by investing Rs. 10,000 per month for 30 years, an investor can receive a monthly pay-out of Rs. 1.2 lakh.

How does Freedom SIP operate then? You grow your wealth by investing in your preferred source schemes through the SIP route. After the SIP tenure is over, your corpus is transferred to a target scheme where an SWP is initiated. This enables you to reap a monthly income through the SWP route. Since you have the ability to choose the source scheme, you must pick wisely, based on your risk appetite, investment horizon, and return requirements.

There is no reason why you should not be able to retire early or pursue your dreams, as long as you ensure that your future requirements are met. That is exactly what the Freedom SIP provides you with —the ability to secure your future in your youth. And, remember, the faster you begin, the better the returns.

The views are personal and are not part of the Outlook Money editorial Feature

Pranav Muzumdar,Director,Mangsidesh investments Private Limited