30 October 2024
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Systematic Investment Plan (SIPs) offer a methodical and disciplined approach to investing in mutual funds. By making regular contributions at fixed intervals, investors can harness the power of compounding and potentially achieve long-term financial growth. SIPs provide convenience, flexibility, ands the opportunity to build wealth steadily over time.
Taking this one step forward, ICICI Prudential presents an innovative solution, Freedom SIP. This combines the advantages of SIP and Systematic Withdrawal Plan (SWP). It promotes a goal-oriented investment approach, enabling individuals to accumulate wealth and systematically withdraw profits.
The Concept
Freedom SIP seeks to offer investors a comprehensive solution, covering both investment and withdrawal stages. It underscores the value of systematic investments and withdrawals versus lump sum actions, facilitating goal-aligned, disciplined, and focused investing.
Three Phases
Freedom SIP involves three distinct phases that work together to help investors achieve their financial objectives:
- Investment Phase: In this phase, investors make regular investments through SIP, with a chosen monthly SIP amount and tenure, based on individual financial needs. Depending on the chosen amount and tenure, investors can anticipate the monthly SWP payout they will receive in the future.
- Switch Phase: Post-SIP tenure, the accumulated corpus switches from the source to target scheme, securing the investment phase wealth against market volatility.
- Withdrawal Phase: In this period, investors start receiving pre-decided SWP payouts from the target scheme at defined intervals. The SWP payout provides investors with a secondary income stream, allowing them to enjoy the fruits of their investments while their remaining corpus continues to grow.
How It Works
To initiate Freedom SIP, investors need to follow these steps:
- Deciding Monthly SIP Amount: Select a monthly SIP amount considering your financial capacity and goals.
- Choosing SIP Tenure: Determine a SIP tenure that suits your financial objectives, between 8 to 30 years.
- Selecting Source Scheme: Choose an initial investment scheme. Considering the long-term investment objective, an equity-oriented scheme could be selected based on the investor’s risk profile.
- Target Scheme Selection: Identify a target scheme aligned with your investment goals and risk appetite.
- Withdrawal Phase: Post the SIP tenure, start receiving SWP payouts from the target scheme at regular intervals.
Key Benefits
- Goal-based Planning: Freedom SIP aligns investments with financial goals for a structured path towards financial independence.
- Long-term Investing: Freedom SIP encourages long-term investing, crucial for wealth creation and capitalizing on compounding.
- Efficient Tax Optimization: Freedom SIP optimizes tax during withdrawal, enhancing investment efficiency. Under the new tax regime, long-term capital gains on equities and mutual funds up to Rs 1 lakh are not taxable. Gains above Rs 1 lakh are taxed at 10%.
- Systematic Payouts: With SWP, investors receive regular payouts while the remaining corpus grows, ensuring balanced wealth management.
To conclude, Freedom SIP is a comprehensive solution for those seeking financial independence, encompassing systematic SIP investment, switching to a target scheme, and systematic withdrawal. It provides a comprehensive approach to wealth accumulation and management. Its goal-oriented planning, focus on long-term investing, efficient tax optimization, and systematic profits make it a path to financial independence and security.
Kamala Kanta Sahoo, Mutual Fund Distributor
Disclaimer
The views are personal and are not part of the Outlook Money editorial Feature.
