Planning for the long term often feels like one of those things we know we should do but end up pushing to ‘someday’. Pertaining to money, many of us tell ourselves we’ll start investing once we earn more, save more, or understand things better. However, you don’t need to be a finance wizard or wait for the perfect time to start building a financial future you feel confident about.
If you have grown up seeing your parents investing in traditional financial instruments, mutual funds may seem like unfamiliar territory. You might’ve heard someone say, ‘Mutual fund sahi hai’. But what does that mean when you’re considering saving for your child’s college education, buying your first home, or retiring without financial stress?
That’s exactly what this blog post is about. It aims to remove the confusion around long-term mutual fund investing and walk you through the process in a clear way. Think of this as a friendly nudge to take your first (or next) step towards financial clarity.
Getting Specific: What Are You Really Investing For?
Unless you know why you need to invest, it’s challenging to stick to it when life gets busy or markets get bumpy.
Think about the big milestones in your life that you’d like to be financially prepared for. Maybe it’s funding your child’s higher education abroad, buying a house, planning a wedding of your dreams, or even retiring comfortably without depending on anyone. These goals might seem far off today. However, the sooner you start planning for them, the easier it may become on your pocket.
This is where SIPs (Systematic Investment Plans) could be your best friend. With SIPs, you don’t need to invest a large amount in one go. You can invest a specific amount every month or quarter (periodically) towards a specific goal, and your money may potentially grow over time with the power of compounding.
Here’s how you can begin:
● First, list your long-term goals with a rough estimate of how much each might cost in today’s terms.
● Next, consider the number of years you have until it’s time for each goal to materialise.
● Then, account for inflation because ₹10 lakhs today won’t have the same value 10 or 15 years down the line.
● Finally, use a SIP calculator to work backwards and find out how much you need to invest to reach that amount in time.
Goal 1: Planning for a Child’s Higher Education
Every parent dreams of giving their child the best education possible, whether it means an MBA from a top college, an engineering degree from a top Indian college, or even a course abroad. However, education costs are rising faster than most of our salaries. What costs ₹30 lakh today could double or more in the next 10-15 years.
Let’s break this down with some basic assumptions:
● The current cost of higher education: ₹20 lakh
● Time left until the child starts college: 20 years
● Education inflation rate: 8% per year
Now, using a simple future value formula or an online future value calculator, the projected cost 20 years from now would be around ₹93 Lakhs. If you start planning now, all it takes is a monthly SIP of roughly ₹15,000, assuming an average return of around 8% per year. The earlier you begin, the lesser/lower the monthly burden can be.
Goal 2: Buying a House
For most Indians, owning a house is much more than a financial milestone that is to be achieved. It is a symbol of security, pride, and freedom, whether it’s moving out of a rented flat, buying a bigger home for your expanding family, or having a space that is all yours.
However, the problem is, property prices don't remain the same. If a decent home in your preferred area costs around ₹40 lakh today, don’t expect it to cost the same 10 years from now (assuming 7% annual inflation).
Using a future value calculator, the house could cost you around ₹78 Lakh in 10 years. If you begin now with a targeted monthly SIP, assuming 7% annual returns, you’d need to invest around ₹45,000 per month to reach that number in time.
While it’s a big commitment, you can always tweak the goal (e.g., increase the tenure, consider a smaller property, or plan for a part-loan/part-SIP route).
Goal 3: Child’s Marriage
After home ownership, another goal that many Indian parents prioritise is their child’s wedding. Many dream of a grand celebration, a joyful gathering of loved ones with all the customs and traditions, but it comes with a hefty price tag.
Like real estate and education, wedding expenses are not immune to inflation either. Let’s say a wedding today would cost you around ₹20 lakh. That might include venue costs, catering, decor, jewellery, clothes, and some buffer for unexpected extra expenses. Now, assume your child’s wedding is around 20 years away, and inflation continues at a modest 7% annually.
The value of ₹20 lakh after 15 years at 7% inflation will be approximately. ₹77 lakh. If you start a SIP now and expect around 8% annual returns, you need to invest roughly ₹13,000 per month to achieve this goal in 20 years.
Seize The Moment
Eyeing mutual funds to set long-term goals? Well, there's more to it than starting SIPs. What is also equally important is to build patience, discipline, and total clarity. Remember, each rupee you save or invest today will help tomorrow.
Disclaimer:
The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The document has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. The sponsor, the Investment Manager, the Trustee or any of their directors, employees, associates or representatives (“entities & their associates”) do not assume any responsibility for, or warrant the accuracy, completeness, adequacy and reliability of such information. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Entities & their affiliates including persons involved in the preparation or issuance of this material shall not be liable in any way for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including on account of lost profits arising from the information contained in this material. Recipient alone shall be fully responsible for any decision taken on the basis of this document.
Mutual Fund Investments are subject to market risks, read all the scheme related documents carefully.
