Freedom SIP

Wealth Creation and putting the generated wealth to best use while fulfilling various financial goals is everyone's wish. A good financial planning certainly helps one attain financial freedom - a situation wherein you are free to fulfil your dreams while investments effectively keeps your financial stress at bay.

Each investment has a purpose attached which is to cater to an upcoming financial goal in life. Investment through Systematic Investment Plan (SIP) in mutual funds to create long-term wealth is one of the established and trusted ways. SIP ensures small but continuous contributions to create long-term wealth.  And thus SIPs are more like solution providers. 

However, there are goals such as retirement wherein one needs to withdraw from the corpus created. To cater to this requirement, investors can consider using Freedom SIP. Freedom SIP — an innovative add-on feature — is a blend of a SIP and SWP which helps investors meet their financial goals by offering a goal-based planning (Systematic Withdrawal Plan). 

Essentially, there are three parts in Freedom SIP. First, grows your wealth through SIP route for the tenure you choose, second, switch to a target scheme post the tenure completion and third, let the investors reap the benefits of monthly payouts through SWP till the accumulated units last. The monthly withdrawal amount will be in multiples of the SIP amount.

The investment tenure here can range from 8, 10, 12, 15, 20, 25 and 30 years, basis your goals. For instance, if your SIP is Rs 10,000 for a tenure of 8 years, the Freedom SIP feature will let you have a systematic withdrawal of Rs 10,000 (1X) per month post the tenure completion. If tenure is 10 years, the withdrawal will be 1.5X of SIP instalment i.e. Rs 15,000. From the tenure of 12 years onwards the monthly withdrawal will rise in multiple from 2X or Rs 20,000 to 12X or Rs 1.2 lakh for the SIP tenure of 30 years.

How can Freedom SIP help achieve financial goals?

Often, starting SIP is fairly an easy task while continuing it for the chosen tenure is difficult for most of the investors. Moreover, majority of the investors invest in a random manner. Even among those who invest with goals in mind, not even 10% stay invested till they reach their respective financial goals. Majority either terminate their SIPs or redeem unnecessarily along the way. Thus, the very purpose of investment stands defeated. 

During the chosen tenure in Freedom SIP, an investor is in a growth and accumulation phase. Given that the investment duration is protracted, investors should ideally choose an equity oriented fund. This is an important stage of investment as your money grows with time and at the same time the cost of investments is averaged out given the various market conditions. 

Once the tenure ends, it is time for the next step – switch the accumulated corpus to a target scheme. The idea here is to move the corpus to a less risky scheme such as the hybrid or debt category fund and conserve the amount created to meet an investors' goal. Most often if the goal is retirement or the likes, it is seen that investors are not sure as to how to go about redeeming from their accumulated corpus in a systematic manner. Either they redeem the entire amount or leave the sum as it is. This is where SWP comes in. 

A continuous monthly payment through SWP mode is akin to a creating an additional stream of income which can be put to use for various needs. It also aids in bringing a sense of freedom to utilise the amount whichever way the investor wants. The investor need not redeem all units at one go. This allows the rest of the units to continue with its grow in value journey over time. Furthermore, such an arrangement keeps mismanagement of funds at bay. Given that the payout amount is pre-decided, investors can plan their cash flows in an organized manner.

To conclude, freedom SIP keeps your wealth creation journey on track, helps you remain goal-focused and most importantly get you in a disciplined habit of systematic investment. The resultant impact of the feature translates into a happy experience for investors over the long term.

(Written by: Jimit Shah,Proprietor,Jams Wealth)