We’ve all heard the story of the tortoise and the hare who decided to race, and the tortoise wins the race despite being slow. The tortoise won the race even though it moved slowly because it maintained steady progress without stopping. The hare lost the race because it took a break to rest, although it believed it would win after resting briefly.
The story's lesson about investor conduct exists as a fundamental principle for investment decisions. Investors use their funds to accomplish specific financial objectives, including purchasing homes, funding educational needs and establishing retirement savings for a comfortable lifestyle.
“Meeting these financial goals requires starting one’s investment journey early and remaining consistent with one’s investments across market cycles,” says Satish Prabhu, Vice President, Head of Content & Products, Franklin Templeton India.
Summary of this article
Consistent Investment Approach
What methods should investors follow to maintain regular investment patterns that will help them achieve their financial objectives? Mutual fund investors can establish disciplined investment habits by using Systematic Investment Plans (SIPs). The SIP scheme enables investors to start their investment journey with just Rs 500 monthly contributions.
“SIPs allow investors to establish regular fixed-amount investments which help them accomplish their objectives. Investors who want to reach their goals quickly can increase their SIP contributions annually as their income grows,” says Prabhu.
Reaching The Rs 5-Crore Goal
Neha, who was starting her career at 25, chose to invest through an SIP to build a Rs 5 crore corpus by her 60th birthday. Neha gained 35 years of investment time by starting her investments at the age of 25. With a 12 per cent annualized return, Neha could meet her retirement target by investing Rs 7700 each month in an equity mutual fund.
Megha, on the other hand, decided to plan for her retirement when she turned 40. She consulted her financial advisor who highlighted that since she had only 20 years left to invest and reach her retirement goal of creating a corpus of Rs 5 crore by age 60, she needed to invest Rs 50,000 every month in an equity mutual fund assuming an annualized return of 12 per cent.
“The above examples illustrate the importance of commencing one’s investment journey early. Starting your SIPs early allows your investments to compound over longer time periods which could help meet your financial goals on time,” suggests Prabhu.
Delaying your decision to start an SIP or being inconsistent with your SIPs could be a mistake akin to the hare deciding to take a nap during the race. This could make it harder for you to reach your desired goal. Start your SIP early and be consistent with your investments across the up and down cycles of the market till your goal is reached.
