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In this fast-paced world, where time is precious and financial responsibilities grow with each passing day, finding an investment approach that aligns with your life's trajectory is paramount. A game-changing approach, SIP with Top-Up ensures that your investments keep up with your changing lifestyle and protects your wealth from inflation's eroding effects.

Gone are the days of monitoring market movements and constantly adjusting your investment plans. With SIP and its automated Top-Up feature, you set out on a hands-free journey to steadily and gradually amass wealth. As your income grows, so do your investments, and with the power of compounding, your wealth multiplies effortlessly.

SIP Top-up gives anease of increasing your investments, the wisdom of regular contributions, and the extra potential of compounding growth. You can unlock the secret of building sustainable wealth and make financial independence achievable without your active participation. Let's explore further this simple yet revolutionary idea and understand certain aspects of building wealth with SIP Top-up.

1. Automation helps bring in Discipline: 

SIP Top-up is a user-friendly strategy that promotes consistent and methodical investing through automation. It assists people in developing the habit of growing investments without having to worry about market timing or frequent manual modifications. However, it's essential to have a reasonable selection of suitable mutual fund schemes based on risk tolerance, investment horizon, and financial objectives. 

Being automated also brings in the discipline of increasing your investments steadily with time. Often people start SIPs and then forget about it for years together thus effectively end up saving less and less every year, both due to inflation in absolute terms and as a percentage of your income. Even from the perspective of saving consistently in ‘real-value’ terms, the increase in SIPs yearly must at least match the inflation figures and one can add more to adjust for change in income levels and living standards.

2. Enables you to build wealth faster: 

Increasing your SIPs with Top-Up facility can greatly improve growth of wealth and hasten the wealth creation journey for you along with accomplishment of financial objectives. This powerful strategy takes advantage of systematic investing, compounding, and automatic increments in savings to propel your wealth growth manifold. Let us understand the power of SIP Top-Up by comparing it with a normal SIP assuming market returns of 12%. 

We can clearly observe that the wealth created increases by a substantial margin if we opt for a SIP Top-Up option across all horizons and more when the periods are longer with the power of compounding. 

3. Helps Achieving Financial Goals: SIP Top-Up is a useful tool for attaining your financial objectives faster once it is linked with your financial goals as compared to simple SIPs. Having a purpose-driven or goal oriented investment strategy that keeps you motivated and focused when you match and map your SIP investments with these objectives. With the benefit of compounding, even the goals that may seem to be unachievable can surprisingly look achievable if proper planning and SIP Top-Up needs are identified. Even when a simple SIP is sufficient, the Top-Up SIPs would add that extra layer of comfort and margin should anyway go wrong when the goal maturity is near. In addition, it will also take care of your increase in aspirations and living standards with time such that your goals need not be fixed.

Let us see this with an example where we have a higher education goal target amount of Rs.2 Crore, maturing after 15 years. Now assuming market returns 12%, we can see that the normal /fixed SIP amount required would be around Rs. 42,000 per month. However, if one decides to increase the SIP by Rs.5,000 every year, then the first year SIP amount required falls down drastically to around Rs. 17,000. Thus, a goal becomes more achievable with Top-up SIPs. 

Now, what would happen if the person is capable of saving say Rs.42,000 and still do a top-up of Rs.5,000 every year? In such a scenario, the wealth created after 15 years would be Rs. 3.18+ crores, giving you an extra cushion to upgrade to the best college or have a margin of safety, just in case. The original target of Rs.2 crore would have been achieved around 3 years prior to the target date.

Bottom Line 

To make the most of SIP with Top-Up, it is essential to start early, stay consistent, and invest for the long term. As a simple rule, we can think that every SIP has to be a SIP with Top-up SIP. As we have seen, the Top-Up SIPs can significantly transform the course of your financial journey by providing a simple yet efficient way of comfortably achieving your financial objectives along with discipline. 

A month has already passed since the start of the new financial year (FY). When it comes to any matter involving finances, accounts, and taxation, the FY is crucial. Since a lot of activity takes place during this phase, it is an important period for many businesses and employees. Regardless of any action though, the financial year presents an opportunity for everyone to revisit their finances and their plans for the new year. There are a few things that ought to be done. Here’s a brief checklist of the things you should do at the start of every FY. 

1. Revisiting your Financial Plans

A long-term financial plan is a very important element of any person’s financial journey in life. The idea is to identify, and plan for our financial goals and align our portfolio with savings to fulfill them. Thus, it becomes crucial that we should regularly review our goals and plans. The start of the financial year presents an opportunity to revisit your goals. Typically the need for any change may arise due to any change in your current life including family composition, financial situation or your own requirements and aspirations. 

2. Portfolio Review

Your portfolio consists of different asset classes and different underlying products /investments. The portfolio review is where we are making decisions on the portfolio composition and reviewing the underlying holdings. If you already have a financial plan in place, your portfolio should be tuned to these predefined objectives. In the absence of the same, there should be some portfolio-level asset allocation strategy followed as per your risk profile. Reviewing your portfolio may lead to rebalancing the asset allocation to start with. At the granular level, you would also want to make sure that you have ‘suitable’ holdings while removing any non-required, long-term non-performing holdings.

3. Managing Incentive & Salary Increment 

This is the time for many to receive the yearly performance incentive /bonus. The joy of earning the annual bonus, which is something we all look forward to, is followed by many plans about how to spend it. Further, this is also the time when you look forward to your salary increments. With both, a sizable amount and an increased cash flow every month, it is also the time to plan for the same. Surely, rewarding yourself with a well-deserving holiday break or a new gadget is well justified. However, going overboard and spending more than required is something you would wish to avoid. So again, it is that time of the year when you put some part of that bonus and increment to good use by investing & saving it towards your goals. Note that regularly increasing your monthly savings or SIP and investing lumpsum amounts significantly contributes to your wealth creation journey.

4. Assessment of Insurance Coverage 

Your responsibilities notably grow after key life events like marriage, parenthood, buying a house, etc. Make sure your insurance has enough coverage to handle all of these newly added commitments. Return back to the calculations you would have used to determine the appropriate level of coverage for yourself and your family members, add the amount required to cover the additional responsibilities and purchase any extra coverage that you require. However, each of those measures must be completed while taking into account your needs and possible risks. Keep in mind that you should reassess your insurance coverage each year to make sure it is sufficient to cover both your standard of living and the growing cost of medical care.

5.Tax Planning 

The beginning of the financial year is a good time to do your tax planning rather than the year-end. That’s because you have enough time to calculate your expected tax liability and make decisions for savings and spending for tax-saving purposes. Moreover, this is the right time to do so since there is no rush or pressure of deciding something quickly and thus you are less likely to make any mistakes. You now have ample time to estimate tax saving needs and evaluate all options available and make those investing & spending decisions for the entire year.

6. Revisiting your Financial Behaviour & Past Decision  

Your financial and investment behaviour is perhaps the most important determinant of your financial success /well-being over the long term. Every investment decision taken, not taken or delayed carries risk, return and opportunity cost elements. Decisions influenced by emotions, biases, unrealistic expectations and so on can have a huge impact on your wealth creation journey. The start of the year is an opportunity to learn from your financial and investment decisions taken over the last year which can be improved now. It is also an opportunity for you to set some benchmarks for yourself and frame a proper process /checklist for any financial decisions that you can make in future.

Conclusion: 

We celebrate and welcome the start of the new calendar year with a lot of excitement and zest. Most of us also set new resolutions and targets for the new year. The start of the new financial year should be seen as equally important in the financial sense. Why not set some new financial resolutions? This is a time for self-assessment in monetary terms and resetting yourself close to your financial objectives and well-being. One should resolve to be a better and wiser investor and ensure that your financial path in the coming year is clear and well-planned. It is time for you to also pick up the phone and schedule a meeting with your mutual fund distributor/ advisor and set the ball rolling.

Investing is a risk-versus-reward game. Where some have made millions, many more have lost. What are the characteristics that differentiate a successful investor? Successful and exceptional investors, such as Warren Buffet, Benjamin Graham, and Rakesh Jhunjhunwala, exhibit critical character traits that set them apart from the crowd. Have you ever thought about what all great and successful investors share in common? What distinguishing characteristics do these investors possess that you do not?

Successful investors aren't necessarily the brightest people on the planet. Being successful in your investments may have little to do with intellectual prowess and almost everything to with your investing mindset. Let's take a look at the key personality traits you'll need to be a successful investor.

1. Patience 

Patience is an essential trait of successful investors. When they decide to invest, they do so by keeping the long-term picture in mind rather than making quick gains. Some of the investments may not perform at all for quite some time but if one is confident in the fundamentals, sooner or later, results will follow. In the long term, the prices will eventually follow and catch up with the profits. Even the corollary is true. We get tempted for a very high-performing stock where the fundamentals may not be that strong. There is a test here too. However, many of us fail the test of patience. All we need is some patience and the ability to remain calm in the face of turbulence.

2. Passion and Determination

The road to success in investments is paved and simple, yet difficult to follow. One of the key differentiating trait is consistency in what you are doing. All successful investors have their own science which they have practised over and over again and perfected over the years so that it now looks more like an art. One has to be committed and stay focused to practice your approach towards investments. Keep learning and improving your investment approach. If you are investing in say mutual funds, you may have saved a lot of time and effort in analysing stocks. However, still there is a need for you to be passionate about and focused on wealth creation and to follow your investment objectives /asset allocation regularly, with discipline.

3. Keep Emotions in Check

Sentiments are always present in the stock market. The stronger they are, the sharper is the market movement moves. Sentiments can cause a financial storm in the investment world. . That is why the risk of getting sucked into the market ‘mood’ is as dangerous as it is real. Beware of the two most powerful emotions in the market - Fear and Greed. Successful investors though can identify and differentiate the real from the hype and see beyond these emotions. They tend to get very active at such times since the market throws up many opportunities during this time and they act decisively during such irrational times and make the most of their investments. To be a successful investor, you must be emotionally neutral when it comes to winning and losing what. Winning and losing are just part of the game.

4. Understand and accept volatility

There are two way of dealing with volatility. One, the trader’s mindset which drives people to react to the volatility. Second, is the investor’s mindset where you avoid the volatility altogether. Many investors become concerned during volatile times and begin to question their long-term investment strategies. This is especially true for new investors. Experienced investors know that market volatility is unavoidable and designed to move up and down in the short term. More importantly, it is extremely difficult to time the market. Riding the volatility waves while staying afloat without getting wet is what would differentiate the successful investors from the novice ones.

5. Avoid Speculation

A speculation is a guess or a hope of something happening which is not well researched. Such speculations can be in form of tips from friends and from so called social media experts which we find floating around almost everyday. This should be taken with extra bit of caution as it can possibly be to lure unknowing investors. The opposite of speculation would be well-researched, future projections based on sound fundamentals and good assumptions. One can’t really replace speculation with such a well-researched projections. Successful investors do not engage in speculation and see it more like a gamble with a known outcome with time. Some novice investors may get excitement and fun in speculating but, it is a sure way of losing both peace of mind and money.

6. Ask Questions

Good investors understand that it’s better to ask a few additional questions than to regret or be locked into a bad investment. They are inquisitive and ensure that they understand all of the “fine print” of any investment product or asset. Any financial /investment product has its’ own positive and negative factors. Should it meet your expectations, needs, risk appetite, liquidity needs and costs, is something you must question. Before making any decision, successful investors ask questions and consult with unbiased sources. To put it another way, they educate themselves and invest only in products which they are very familiar with.

7. Listen to what is important!

Good investors keep themselves updated just enough on the major economic, geopolitical undercurrents that may impact the markets on the long run. There is no need to track daily movements of markets and listen to every little noise happening on a daily basis in the market. With experience, successful investors learn to pick up only the meaning information and avoid the rest as just noise. With information so easily available and in such a huge quantum, this is an essential skill we should master.

Bottom Line

Becoming a successful investor takes time, patience, efforts and learning. There is no shortcut to success but knowing the mindset and the characteristics of successful investors can surely help us in our journey. Surely, even we can and be as successful as our investment gurus, at least by our own standards.

The pandemic has come as a wake-up call for many of us. People are now giving a lot more priority to the quality of life, living and not just working their entire life. Early retirement may be a recent phenomenon, but it would have crossed the minds of almost everyone today. However, retirement in India is not as easy as it looks. In absence of social security, lack of adequate savings towards retirement and the uncertainty of the finances makes retirement planning very challenging.

What are the retirement solutions available?

The most popular solutions for retirement solutions today are the schemes offered by government namely the NPS, the PPF, the Employees Provident Fund (EPF) and the Atal Pension Yojana (APY). However, being government schemes, they have their own set of advantages and disadvantages. A lot of investors do find they helpful but many also find them inflexible and constrained with limits on the maximum amount. Apart from this, many investors also invest in mutual fund schemes – both as a tool to create wealth and to manage retirement kitty. People are now also increasingly attracted to lifetime income products which are less volatile and are not market-linked. Such products are offered by life insurers and are popularly known as Annuity or Pension Plans. Let us explore them.

What are Annuity Plans?

Your retirement kitty, irrespective of where you save it, runs the risk of being exhausted in old age. Annuity plans are plans offering you a guaranteed income either for life or for a stipulated duration. By design, they protect an individual against the risk that he may live longer and exhaust his resources. Under an annuity plan, the investor normally pays either a lump sum or regular instalments in the accumulation period and then get regular payments as long as you are alive or for a pre-specified fixed period.

If you think about it, both an Annuity Plan and a Pure Term life insurance plans are complementing each other. Pure term insurance covers the financial risk of 'unexpected death' leaving the family without any financial support. An Annuity plan, on the other hand, covers you by providing adequate financial resources if you continue to live long!

Types of Annuity Plans:

Depending on when you buy them, annuity plans can be divided into two categories: Deferred Annuity and Immediate Annuity. An immediate annuity is one for which you pay a lump sum amount, rather than instalments over time, and then the plan pays you a regular guaranteed payout. An immediate annuity plan is mostly purchased by individuals who are about to retire and would like to receive a monthly income right away. A deferred annuity plan, on the other hand, may allow you to either pay a lump sum or pay premiums /instalments and build a corpus over a specified period. Post this, your annuity will start giving you fixed periodic payments for a chosen period or for life.

Advantages of annuity plans:

• First, annuity plans come with the assurance that you will continue to receive money for the rest of your life. The insurance company takes on the risk of paying you for a lifetime. 

• Second, annuity plans eliminate reinvestment risk. Reinvestment risk is where you have to invest in future but the interest rates/returns available at that point of time in future may be very low compared to today. As you can imagine, there is a trend of falling interest rates in India which is already causing a lot of trouble to the senior citizens today. However, annuity plans with guaranteed rate of payout eliminate this risk.

• Third, while there are investment caps in many other retirement plans, especially the government-backed schemes, there is no such investment caps/limit on annuity plans.

• Lastly, annuity plans offered by insurers offer a lot more in terms of features and payout flexibilities. There are plans allowing you to add your other family members too (joint life) where your family member /spouse will receive the money after you. Some plans also offer you to receive lump-sum amounts, typically return of premium, after certain periods as per choice. There are also options available to add death benefit, critical illness, permanent disability benefits, etc. You may also have the option to add top-ups to the plan, typically available in a deferred annuity plan during your premium paying term.

How much will you get?

The ROI or return on investment on annuity plans often depends upon whether it is an immediate annuity plan or a deferred one and the duration of delay before the start of the annuity. Typically, insurers presently are offering between 5.1% to up to 5.9% for immediate annuity plans and up to 11.50% plus for those with deferment period. The longer the deferment period, the higher would be the promised returns. Please note that these are indicative rates and are dynamic in nature with changes normally happening every quarter for the new buyers. The simply put, it is a question of how the cashflows are planned. One can smartly create a smart ladder of multiple annuity plans too where your annuity income would increase /grow after every few years! It would be interesting to work that out with your insurance advisor...

Choosing An Annuity Plan:

Annuity plans, should not be seen as a substitute for mutual funds as both are very different in nature and have their own reasons to buy. A smart investor could club both of together – contribute a 'part' of the portfolio as a lump-sum in annuity while the remaining portfolio will continue to grow and will be freely available. You can even continue with your SIPs. While annuity will give the guaranteed cashflows, your mutual fund investments /SIPs would work at building your wealth – both different objectives. Further, they cannot be also readily compared with traditional insurance plans which mix insurance benefits with investments, often compromising both. Annuity plans are designed as cash-flow oriented plans and hence are a different breed altogether.

Like any other financial product, the key parameters for selecting the right annuity plans are safety, returns, and liquidity. We strongly suggest that if you are planning for retirement to explore the annuity /pension products offered by the insurers. They do score over many traditional, government schemes on many points. Before buying an annuity plan, please do take a look at the track record of the annuity provider, their reputation, financial strength and not just product features. It would be best to consult your insurance advisor on the same. For us, the elimination of uncertainty and having a guarantee in your sunset years wins the argument for annuity plans.