You Might Fund Your Dream Vacation With Mutual Funds

By Sanjay Chawla,

As summer vacations dawn, travel fever grips the country. Leisure travel has made a roaring comeback in 2024–2025, with spending levels rebounding to pre-pandemic highs. In the first half of 2024 alone, 1.5 crore Indians travelled overseas—up 14 per cent year-on-year—collectively spending over Rs 2.83 lakh crore in 2024. But those dream vacations don’t come cheap: solo mountain trips can cost Rs 1 lakh, and European couple tours for 12 days can start from Rs 6–7 lakhs (including airfares). The solution? Smarter planning, budgeting, and aligning your finances to your wanderlust. With the right moves, the world is yours—no financial stress attached.

Source: Booking.com India Travel Predictions Report 2024; Times of India; Thomas Cooks

The Good news is that the typical adage, ‘boond, boond sagar bane’, holds true here as well. The first step towards planning your dream vacation is to plan your finances by squirreling money away every month through a systematic investment plan in a couple of well selected mutual fund schemes.

3 Ways Mutual Funds Can Help Fulfil Your Travel Goals

1. Start a Travel SIP (Systematic Investment Plan)

A travel-specific SIP is an excellent way to save for your trips. Whether you’re planning a short domestic getaway or a long-term international journey, SIPs allow you to invest small amounts regularly. These investments grow over time, ensuring that your travel fund might be ready when you need it.

For instance, if you plan to visit Paris with your partner in three years, budgeting INR 5-6 lakhs, and assuming a return of 13 per cent annually, you’d need to start a SIP of approximately INR 12,000 per month. Alternatively, you could begin with a lump sum of INR 1.5 lakhs, reducing your monthly SIP to around INR 7,500.

2. Leverage Liquid Funds for Short-Term Goals

If your travel plans are within the next year, consider liquid funds. These funds may provide better returns than a savings account while ensuring high liquidity and low risk. For example, if you’re saving for a monsoon retreat costing INR 1 lakh, investing in a liquid fund or an arbitrage fund can help you achieve your target while keeping your money accessible. As opposed to a savings bank account where you could earn as low as 1.75% per annum, you could more than triple your earnings to around 6% per annum by letting it compound in liquid funds. If you invest a little more smartly and put the money in an Arbitrage fund you could earn as much as 7.5% over a year.

3. Invest in Equity Funds for Long-Term Travel Plans

Planning a world tour or a luxury cruise in 5-10 years? Equity funds are ideal for long-term travel goals, offering the potential for higher returns. With the power of compounding, these funds can help you build a significant corpus. For instance, investing INR 10,000 monthly in an equity fund with an expected return of 12 per cent can yield around INR 20 lakhs in 10 years, enough for your dream vacation.

Takeaways for Seasonal Travelers

For Winter Trips: Start a SIP in January for the following December. A 12-month SIP in a balanced or hybrid fund may ensure your holiday expenses are covered. This is because a hybrid fund like a Balanced Advantage Fund would typically earn more than an arbitrage fund

For Summer Breaks: Begin investing 18 months in advance using hybrid funds such as multi asset funds to manage peak-season costs effectively. If you can afford to invest for a 3–5-year period, then you can even look at a pure equity fund which has the potential to deliver good returns. Large Cap funds should be your prime pick here.

Seek Expert Guidance

Seek the advice of an AMFI Registered Investment Advisor/mutual fund distributor to tailor investment strategies to match your travel goals. With systematic planning, disciplined investments, and the right advice, you might turn your dream vacation into a reality without compromising your financial stability.

So, start your travel SIP today, and let your investments take you places you’ve always dreamed of. Happy travelling!

(The author is CIO Equity, Baroda BNP Paribas AMC)

Disclaimers

The views and investment tips expressed by experts are their own and are meant for informational purposes only and should not be construed as investment advice. Investors should check with their financial advisors before taking any investment decisions.

The material contained herein has been obtained from publicly available information, internally developed data and other sources believed to be reliable, but Baroda BNP Paribas Asset Management India Private Limited (BBNPP), makes no representation that it is accurate or complete. BBNPP has no obligation to tell the recipient when opinions or information given herein change. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. This information is meant for general reading purposes only and is not meant to serve as a professional guide for the readers. Except for the historical information contained herein, statements in this publication, which contain words or phrases such as ‘will’, ‘would’, etc., and similar expressions or variations of such expressions may constitute forward-looking statements. These forward-looking statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those suggested by the forward-looking statements. BBNPP undertakes no obligation to update forward-looking statements to reflect events or circumstances after the date thereof. Words like believe/belief are independent perception of the Fund Manager and do not construe as opinion or advice. This information is not intended to be an offer to see or a solicitation for the purchase or sale of any financial product or instrument. The investment strategy stated above is for illustration purposes only and may or may not be suitable for all investors. The information should not be construed as investment advice and investors are requested to consult their investment advisor and arrive at an informed decision before making any investments. The Trustee, AMC, Mutual Fund, their directors, officers, or their employees shall not be liable in any way for any direct, indirect, special, incidental, consequential, punitive or exemplary damages arising out of the information contained in this document. Past performance may or may not be sustained in the future and is not a guarantee of any future returns.

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