In India, crossing the Rs 1 crore threshold is often viewed as a benchmark of financial success. The sum is associated not just with wealth, but with possibility: opening doors to global education for children, making a home purchase more feasible or offering the comfort of financial self-reliance.

But for a salaried professional, jumping from a monthly saving of Rs 10,000 to a corpus of Rs 1,00,00,000 can feel like a tall order. 

With discipline, patience, and the power of Systematic Investment Plans (SIPs) in mutual funds, even a modest Rs 10,000 per month can realistically build towards that goal.

SIPs let you invest a fixed amount regularly in mutual funds, regardless of market highs or lows. Returns generate more returns, and over long periods, this snowballs dramatically.

By taking advantage of rupee cost averaging, you buy more units when prices are low and fewer when high, reducing the average cost per unit over time.

ALSO READ: Step-Up SIP: Why Does It Make Sense In Current Volatile Market Conditions?

Here is a calculation that demonstrates how to achieve the target of Rs 1 crore with a monthly SIP of Rs 10,000. Assuming an average annual return of 12%, a realistic benchmark for long-term equity diversified funds in India, here is how the timeline looks:

Investing In Mutual Fund SIPs:

Monthly investment: Rs 10,000

Tenure: 21 years

Total investment: Rs 25.2 lakh

Expected rate of returns: 12%

Estimated returns: Rs 79.1 lakh

Maturity corpus: Rs 1.04 crore

If you start with Rs 10,000 but increase your contribution by just 10% every year, you don’t have to wait 20 years. You could hit the Rs 1 crore mark in approximately 15-16 years instead of 20. By year 20, instead of Rs 1 crore, your corpus could soar to nearly Rs 1.9 crore.

Also, remember that time in the market beats timing the market. Even if markets correct temporarily, long-term equity SIPs tend to recover and grow. 

By starting with Rs 10,000 today, you aren’t just saving money: you’re employing your money to work the night shift for you.

Image used for representational purposes. File
| Photo Credit: Reuters

New Delhi:

For millennials, financial planning can often seem like a daunting task, given the multitude of investment options available. However, one method stands out for its simplicity, flexibility, and potential for wealth creation: the Systematic Investment Plan (SIP).

SIPs allow investors to invest a fixed amount of money regularly into mutual funds, enabling them to build a substantial corpus over time. With the ability to calculate SIP returns easily using various online tools, millennials can make informed decisions about their investments. In this article, we’ll explore 10 compelling reasons why SIP investments are perfect for millennials.

1. Easy to Start and Manage

One of the primary reasons SIP investments are ideal for millennials is their ease of initiation. Unlike traditional investments, which often require a significant lump sum, SIPs allow you to start with as little as Rs 500 per month. This makes it accessible to young professionals who may not have a large amount of disposable income. Moreover, the ability to calculate SIP returns in advance helps investors understand how their investments will grow, providing a clear roadmap for the future.

2. Discipline in Savings

Millennials are often accused of being financially undisciplined, primarily due to the temptation to spend on lifestyle upgrades and experiences. SIPs instil a sense of financial discipline by requiring regular, fixed contributions. This disciplined approach ensures that a portion of your income is consistently invested, helping you build wealth over time. With tools available to calculate SIP returns, you can easily track your progress and stay motivated to continue investing.

3. Power of Compounding

The concept of compounding is a powerful reason why SIP investments are highly beneficial for millennials. By reinvesting the returns generated by your investments, you can significantly enhance the growth of your portfolio over time. The longer you stay invested, the greater the compounding effect, leading to exponential growth. This can be easily demonstrated by using a SIP calculator to project returns over different time horizons.

4. Flexibility in Investment

SIPs offer unparalleled flexibility, allowing you to adjust your investment amounts based on your financial situation. If your income increases, you can easily step up your SIP contributions. Conversely, if you face financial constraints, you can reduce your SIP amount without any penalties. Additionally, tools to calculate SIP returns enable you to see how different contribution levels impact your future corpus, making it easier to plan and adjust accordingly.

5. Diversification Across Asset Classes

Another advantage of SIP investments is the ability to diversify your portfolio across various asset classes, including equity and debt funds. This diversification helps spread risk and ensures that your portfolio is not overly exposed to any single market segment. Debt funds, in particular, provide stability and lower risk, making them an excellent option for millennials who may be more conservative in their investment approach. By using a SIP calculator, you can estimate how a mix of equity and debt funds will impact your overall returns.

6. Rupee Cost Averaging

One of the most significant benefits of SIPs is rupee cost averaging. This investment strategy involves purchasing more units when prices are low and fewer units when prices are high, effectively reducing the average cost per unit over time. For millennials, who may not have the expertise or time to time the market, rupee cost averaging ensures that their investments are made consistently, regardless of market conditions. The ability to calculate SIP returns can further demonstrate how rupee cost averaging contributes to wealth creation.

7. Low Entry Barriers

SIPs are designed to have low entry barriers, making them accessible to a wide range of investors, including millennials. As mentioned earlier, you can start with a minimal amount and gradually increase your contributions as your financial situation improves. This low entry point allows millennials to start investing early, which is crucial for building wealth over the long term. Using a SIP calculator, you can simulate different starting amounts and see how they affect your returns.

8. Tax Benefits

Investing in certain mutual funds through SIPs can provide tax benefits under Section 80C of the Income Tax Act. Equity-linked savings schemes (ELSS), for instance, offer tax deductions of up to Rs 1.5 lakh per annum. For millennials, who are just beginning to build their financial portfolios, these tax benefits can lead to significant savings and enhance overall returns. By calculating SIP returns, you can factor in these tax savings and better understand the full potential of your investments.

9. Long-Term Wealth Creation

Millennials have time on their side, making SIPs an ideal vehicle for long-term wealth creation. By investing regularly over an extended period, you can build a substantial corpus that can be used for various life goals, such as buying a home, funding your children’s education, or planning for retirement. The power of compounding, coupled with the ability to calculate SIP returns, ensures that your investments grow steadily over time, helping you achieve your financial objectives.

10. Financial Independence

Finally, one of the most compelling reasons for millennials to invest in SIPs is the path it paves towards financial independence. By starting early and investing consistently, you can build a strong financial foundation that provides security and freedom in the future. With the ability to calculate SIP returns, you can set clear financial goals and work towards achieving them, knowing that you are on the right track.

Conclusion: SIPs as a Gateway to Financial Success

SIP investments offer millennials a structured, disciplined approach to wealth creation, with numerous benefits that align with their financial goals and lifestyle. From the ease of starting and managing investments to the flexibility and power of compounding, SIPs provide a robust framework for building long-term wealth. By diversifying across asset classes like equity and debt funds, millennials can achieve a balanced portfolio that meets their risk tolerance and return expectations.

Moreover, the availability of tools to calculate SIP returns and SIP step-up options further enhances the investment experience, making it easier to plan, monitor, and adjust contributions over time. These calculators not only provide a clear picture of potential returns but also help in making informed decisions that can lead to financial independence.

For millennials seeking a reliable, straightforward investment strategy, SIPs represent an ideal choice. With the right approach and regular contributions, SIPs can serve as a gateway to financial success, enabling millennials to achieve their dreams and secure their future. By leveraging the power of SIPs and staying committed to their investment plan, millennials can maximise their financial potential and build a prosperous future.
 

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

Meghalaya accounted for 9% of the total AAUM at ₹3,623 crore in March 2024, clocking a 111% growth of over ₹1,714 crore in March 2020. Image for representation purposes only. File
| Photo Credit: Getty Images

GUWAHATI

The average net assets under management (AAUM) of the northeastern States has grown by nearly 145% from the 2020 level, an analysis of investments in mutual funds (MF) has revealed.

MF investments rose from ₹16,446 crore in March 2020 to ₹40,324 crore in March 2024, indicating a growing appetite among investors from smaller towns and cities, the study by ICRA Analytics said.

The share of the northeastern States increased to 0.73% of the total AAUM of the MF industry, which stood at ₹55.01 lakh crore in March 2024, up from around 0.67% in March 2020, when the industry’s AAUM stood at ₹24.71 lakh crore.

“Although the contribution of the northeastern region to the total AAUM of the industry is still small in percentage terms, there has been a steady and consistent growth in MF inflows in these States backed by increasing awareness among people and the growing interest among retail investors for investing in equities through the MF route,” ICRA Analytics’ senior vice president and head of market data, Ashwini Kumar, said on Monday.

With an AAUM of ₹29,268 crore, Assam was the leading contributor in the northeast, accounting for nearly 73% of the total investment in March 2024. The AAUM of Assam grew by almost 159% in the last five years, up from ₹11,298 crore in March 2020.

Meghalaya accounted for 9% of the total AAUM at ₹3,623 crore in March 2024, clocking a 111% growth of over ₹1,714 crore in March 2020.

The other States in the order of investment size are Tripura with 5% at ₹2,174 crore (₹1,155 crore in March 2020), Nagaland with 4% at ₹1,668 crore (₹965 crore in March 2020); Arunachal Pradesh with 3.8% at ₹1,532 crore (₹525 crore in March 2020), Manipur with 2.9% at ₹1,152 crore (₹403 crore in March 2020), and Mizoram with 2.25% at ₹907 crore (₹386 crore in March 2020), the data said.

“There has been a steady increase in awareness about the various investment options among people, primarily from smaller towns and cities. This, coupled with growing financial literacy and the surge in interest among retail investors for investing in equities through the MF route, all contribute to good growth in AAUM in towns and cities beyond the top 30,” Mr. Kumar said.

Investor awareness campaigns conducted by asset management companies in the region have also helped build awareness among people, he added.

“However, the MF penetration continues to be low in the country and there is a lot of scope for growth. The burgeoning middle class and rising financial literacy will likely prompt more and more people to resort to financial planning to accrue savings. This is expected to shore up mutual fund investments in the northeastern States moving forward,” Mr. Kumar said.

Growth in net AUM

The Indian MF industry grew steadily in inflows across debt and equity-oriented schemes in April 2024. The net AUM (assets under management) of the industry, which registered a 35% growth in 2023-24, grew by nearly 38% on a year-on-year basis to touch ₹57.26 lakh crore in April 2024, as compared with ₹41.62 lakh crore in April 2023.

The net AUM grew sequentially by 7% compared with ₹53.40 lakh crore in March 2024. Net inflows surged by 97% at ₹2.39 lakh crore, as against ₹1.21 lakh crore in April 2023.

Net inflows into debt-oriented schemes under the open-ended category grew by 78% at ₹1.90 lakh crore in April 2024, up from ₹1.07 lakh crore in 2023. “The Reserve Bank of India’s stance to maintain the status quo on policy rates for the next one or two quarters is likely to lead to some softness in yields in the near term. However, investors are likely to be a little watchful of the developments around election months and will keep a close watch on the global interest rates,” Mr. Kumar said.

Inflows into equity-oriented schemes increased by 192% at ₹18,917 crore (₹6,480 crore). Sectoral or thematic funds registered a 741% growth in inflows at ₹5,166 crore in April 2024, as against ₹614 crore in April 2023.

“The small-cap funds, which witnessed some correction on the back of the recent SEBI mandate requiring routine stress tests to be conducted and had registered net outflows to the tune of ₹94 crore in March 2024, registered net inflows of around ₹2,209 crore in April 2024,” Mr. Kumar said.

“We are of the view that the small and mid-cap funds will continue to hold investor interest in the medium to long term backed by the value created in the entities supported by robust regulatory framework leading to better corporate governance practices, and the government’s firm intent to push for an intrinsic growth in the country’s economy,” he said.

New Delhi:

Markets regulator SEBI on Wednesday extended the deadline for mutual fund account holders till January 1, to nominate a beneficiary or opt out of it by submitting a declaration form, failing which their folios will be frozen.

Earlier, the deadline for existing mutual fund holders to provide a choice of nomination was on or before September 30. 

The move is aimed at helping investors secure their assets and pass them on to their legal heirs.

“Based on representations received from the market participants, it has been decided that the provision… about the freezing of folios, shall come into force with effect from January 1, 2024, instead of September 30, 2023,” SEBI said in a circular.

Further, SEBI asked asset management companies (AMCs) and RTAs to encourage the unit holder to fulfill the requirement for nomination/ opting out of the nomination by sending a communication on a fortnightly basis by way of emails and SMS to all such unit holders who are not in compliance with the requirement of nomination.

The Securities and Exchange Board of India (SEBI), in its circular on June 15, 2022, made it mandatory for mutual fund subscribers to submit the nomination details or declaration to opt out of the nomination on or after August 1, 2022.

The deadline was extended several times.

Market experts are of the view that many mutual fund folios in the past have been opened without nominating anyone to whom the assets should be transmitted in case something happens to the account holders.

This means that the rightful heirs had difficulty in getting the assets transmitted to them due to the hassles of different kinds of documentation requirements.

On Tuesday, the regulator extended the deadline by three months to December-end for existing demat account holders to provide a choice of nomination or formally opt out of nomination through a declaration form.

Additionally, the submission of ‘choice of nomination’ for trading accounts has been made voluntary by SEBI as a move towards ease of doing business. 

Union Finance Minister Nirmala Sitharaman speaks in the Lok Sabha during Budget Session of Parliament, in New Delhi on March 24, 2023.
| Photo Credit: PTI

The Finance Bill 2023 was been passed in Lok Sabha without a discussion and the House was adjourned to meet again on March 27.

Moving amendments to the Finance Bill, Nirmala Sitharaman said, “It has been represented that payments for foreign tours through credit cards are not being captured under the Liberalised Remittance Scheme (LRS) & they escape tax collection at source. The Reserve Bank of India is being requested to look into this with a view to bring credit card payments for foreign tours within the ambit of LRS and tax collection at source thereon.”

Withholding tax on royalties and technical services fee may increase cost of technology import

The withholding tax rate on royalties and fee for technical services paid to non-residents has been raised from 10% to 20%. “This may increase the cost of import of technology in cases where Indian companies are grossing up withholding taxes and any bilateral tax treaty benefits are not available,” said Gouri Puri, partner at Shardul Amarchand Mangaldas & Co.

GST Appellate Tribunals to be set up across country

The Finance Bill has paved the way for setting up GST Appellate Tribunals across the country, with a principal bench in New Delhi and several State benches. The Tribunal will be headed by a former Supreme Court judge or a retired Chief Justice of a High Court. 

Also read: GST appellate tribunal may be headed by a former Supreme Court judge

The measure will have the intended effect of curbing excessive F&O trades only in flat or range-bound markets as when markets are volatile, traders will hope to offset the higher tax by higher payoffs, Mr. Jasani explained. “In the past, such raising of taxes had a temporary minimal impact of F&O volumes. For more effective curbs on volumes, SEBI or stock exchanges may have to link the volumes and Open interest in the futures and options market with the disclosed income or wealth of the participants,” the HDFC Securities official said.

Increase in STT to discourgae excessive trade in F&O

“While the proposed increase in STT will shore up revenues of the Govt to a certain extent, the main idea behind this could be to discourage the excessive trade in F&O segment where a large number of retail traders end up losing money as per a recent SEBI study,” Deepak Jasani, head of retail research at HDFC Securities told The Hindu. “An incidental effect of this could be shifting the F&O trades to SGX, Gift and other locations that do not attract such taxes for participants who have access to them,” he added.

Govt. tweaks Budget proposal to tax distribution from business trusts as income from other sources

In a move that will assuage unit holders of REITs (Real Estate Investment Trusts) and InvITs (Infrastructure Investment Trusts), the government has tweaked the Budget proposal to tax distribution from business trust as income from other sources . “This is now proposed to be treated as return of capital by reducing the cost of acquisition of the units, as far as the issue price of the units. Any amount received in excess of the issue price would be taxable as income,” the Ministry explained.

Stakeholders concern on Angel Tax provisions to be addressed for startup investments

While there have been no changes made to the Budget’s Angel Tax provisions for investments in startups, the Finance Ministry has said all concerns raised by stakeholders in implementation of this proposal would be addressed. “The draft rules related to valuation shall be shared with the stakeholders for their inputs in April itself, and exclusions, currently provided to domestic Venture Capital Funds etc, shall also be considered for similar overseas entities,” the Ministry assured.

This will impact all mutual funds that offer schemes with nomenclatures such as conservative hybrid funds, that invest predominantly in debt but have an equity exposure of up to 35% in their portfolios.

“An arbitrage is being created right now where interest income from debt mutual fund (where not more than 35% invested in shares in domestic company) is not distributed and converted into long term capital gains of 20% (with indexation). In some case it comes to even less than 10% due to indexation. Thus many taxpayers are able to reduce their tax liability through this arbitrage,” the Finance Ministry explained

Tax on debt mutual funds

Income from debt mutual funds that invest up to 35% in equity shares of domestic companies will be taxable at applicable rate since income from equities in such funds do not constitute interest income.

Also read: Government scraps long-term tax benefit for debt mutual funds investing less than 35% assets in equity

Securities Transaction Tax raised on F&O contracts from April 1

The Government is raising the Securities Transaction Tax (STT) on futures and options contracts in the stock market from April 1, 2023, and changes to this effect were brought into the Finance Bill cleared by the Lok Sabha today. Options contracts will now attract 0.021% STT from 0.017% earlier and futures will attract a levy of 0.0125%, up from 0.01%