A couple’s story of meeting important financial goals through the SIP route

mint He reached out to the couple and their financial guide, Santosh Joseph, founder and partner of Germinate Investor Services LLP, an AMFI-registered mutual fund dealer, to understand their personal finance journey.

SIP Power

Freddy and Joseph have known each other for a long time as they attended the same church. In 2005-06, following Joseph’s advice to start a SIP (systematic investment plan) in equity mutual funds for long-term savings, Freddy began investing $2,500–3,000 each month.

Freddy realized the power of this SIP when he needed money in 2011 to finance the expenses of his marriage.

“When I started investing, I didn’t know much about mutual funds or markets. I just received contributions from Joseph and invested the amount. When I was able to cover half of my marriage expenses with my savings, I realized the importance of disciplined saving. The experience also encouraged me to invest more,” added Freddy.

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After the marriage, Priya R also started her SIP investment journey in 2014. The couple’s accumulated corpus also helped them make lump sum payments when they were building a house, a few years after the marriage.

One thing that helped Freddy and Priya R on their investment journey was their “buy and hold” strategy. “Once the account debit happens, it’s like a forgotten investment for us. We never think about withdrawing our investments. We also don’t think about how much the corpus is growing,” added Freddy.

The couple, over the years, have increased the amount of their SIP with rising income levels, to fund their future financial goals, including their son’s education and retirement planning. The lump sum cash inflow that they earn is occasionally used to buy gold (jewelry) or invest in mutual funds.

Commenting on this, Joseph said: “When they do lump sum investments, we reserve that amount in liquid or short-term funds and then initiate an STP (systematic transfer plan) to equity funds over a period of time to reduce stress. of market volatility.

In hindsight, Joseph also believes his team would have suggested a higher capital allocation in the early years for the couple.

He added that “initially, we were very cautious and conservative, even though the mandate was for long-term investments. Having a good asset allocation early on would have given them a higher net worth.”

Fear of getting into debt

Since the couple’s portfolio is skewed toward the equity asset class, when asked if they were ever unsettled by stock market volatility, the couple said it never stopped them from investing more.

“In 2020, one day the markets fell sharply. I happened to see my wallet that day and was surprised to see a loss of $3 lakh in a single day. Then I decided not to look at the app for a while,” said Priya R.

He also remembered his professor’s advice during his college days when all the students were asked to collectively gather a certain amount to buy a good deed. “Although we were afraid that the stocks would fall in the market, our professor told us not to focus on the daily fluctuation but on the long-term gain,” he added.

The key behavioral factor for the couple to invest more is also the fear of asking for a loan to meet their financial needs. “The fear of debt is bigger for us than the fear of losing money in stocks; We know that the risk of losing capital in the equity markets, in the long term, is lower,” said Priya R.

“We live within our means and never intend to take out a personal loan. We maintain a good cash balance above our investments, which serves as a good cushion in case of emergencies”, added Freddy.

teaching his son

The couple is also mindful of teaching their nine-year-old son, Aiden, about the value of money. “Every time our son asks for something, we ask him questions like: ‘why do you want it?’ and ‘do you know how much he costs?'” they said. “We don’t give him everything he asks for, but we make sure he gets what he needs.”

“When he was born, we did two things as soon as we could: we got him a passport and we opened a bank account in his name,” Freddy said. He added, “all the money he gets from family or friends for events like Christmas or his birthday goes into his bank account. We don’t touch that.”

Priya R strongly believes that personal finance education should be compulsory in schools as she believes that saving as a habit should be taught from an early age. “In addition to teaching children about algebra, formulas, geometry and angles, it is also important to instill in them the importance of saving, something that is now practically not found in the educational system,” she added.

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