3 Reasons Why Investors Stop Their Goal-Linked SIPs
With assets under management nearing the 1.8 trillion mark, and the number of active SIPs crossing 1.25 crore recently, the Indian mutual fund industry has been picking up pace lately
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With assets under management nearing the 1.8 trillion mark, and the number of active SIPs (Systematic Investment Plans) crossing 1.25 crore recently, the Indian mutual fund industry has been picking up pace lately. Over the years, SIPs have proven to be a highly effective means of drawing out first time investors who have traditionally invested only in low return asset classes such as deposits and life insurance, and nudge them towards higher growth equity investing.
Some of these SIPs are initially started off keeping future foals in mind, such as a child’s education or marriage, or one’s own retirement. Though many of these goals are long term in nature, the lion’s share of these SIPs end up getting stopped within a year or two, defeating the goal-planning purpose entirely. Here’s a brief exploration of why many a goal-based SIP meets its untimely demise.
Home loan or home purchase
Stopping your SIPs to buy a home may not always be a smart decision. For starters, you need to ask yourself if you’re buying the said house as an investment or as an end user. Taking out a loan at 9% per annum to buy a home as an investment means that you need the asset to grow at a very high rate of return to outpace the interest cost you’ll be incurring on your EMIs. And although buying a home as an end user is a valid aspirational goal, you need to be smart about the timing of your actual decision. Don’t forget to take the annual deduction of Rs.200,000 under Section 24 into account while making your decision. In a nutshell, think twice before you liquidate your SIPs and take on a hefty home loan instead.
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