A Couple’s Story of Achieving Major Financial Goals Via the SIP Path

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mint reached out to the couple and their financial guide – Santosh Joseph, founder and partner of Germinate Investor Services LLP, an AMFI-registered mutual fund distributor – to understand their personal finance journey.

Power of SIP

Freddy and Joseph had known each other for a long time since they attended the same church. In 2005-06, on Joseph’s advice to start a SIP (systematic investment plan) in equity mutual funds for long-term savings, Freddy began investing 2,500 to 3,000 every month.

Freddy realized the power of this SIP when he needed money in 2011 to fund his wedding expenses.

“When I started investing, I didn’t know much about mutual funds or the markets. I just took Joseph’s contributions and invested the amount. When I was able to cover half of my wedding expenses with my savings, I realized the importance of disciplined saving. The experience also encouraged me to invest more,” added Freddy.

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After the wedding, Priya R also started her SIP investment journey in 2014. The couple’s accumulated corpus also helped them make lump sum payments while building a house, a few years after the wedding.

One thing that helped Freddy and Priya R on their investing journey was their buy-and-hold strategy. “Once the debit is made on the account, it’s like a forgotten investment for us. We never think of withdrawing our investments. We also don’t think about corpus growth,” Freddy added.

The couple, over the years, increased their SIP amount as their income levels increased, to fund their future financial goals, including their son’s education and planning for retirement. The lump sum cash inflows they occasionally receive are used either to buy gold (jewelry) or to invest in mutual funds.

Commenting on this, Joseph said, “When they make lump sum investments, we park that amount in liquid or short-term funds and then initiate an STP (systematic transfer plan) into the equity funds over a period of time. to reduce market volatility stress.

Looking back, Joseph also thinks their team would have suggested a higher equity allocation in the early years for the couple.

He added “at the start, we were very cautious and conservative, even though the mandate was to invest for the long term. A good asset allocation from the start would have allowed them to have a higher net worth.”

Afraid to borrow

Since the couple’s portfolio is geared towards the equity asset class, asking them if they’ve ever been unsettled by stock market volatility, the couple said they’ve never been bothered by it to invest more.

“In 2020, one day, the markets fell sharply. I happened to see my wallet that day and was shocked to see a loss of 3 lakh in a single day. Then I decided not to watch the app for a while,” Priya R said.

She also remembered her teacher’s advice during her college days, when all students were asked to pool a certain sum to buy a good deed. “While we feared that stocks would fall in the market, our speaker asked us not to focus on the daily fluctuations but on the long-term gain,” she added.

The main behavioral factor that encourages the couple to invest more is also the fear of taking out a loan to meet their financial needs. “The fear of debt is bigger for us than the fear of losing money in equity; we know that the risk of losing capital in stock markets, in the long term, is lower,” said Priya R.

“We live within our means and never intend to take out a personal loan. We maintain a good cash balance in addition to our investments, which provides a good cushion in case of an emergency,” added Freddy.

Teach your child

The couple are also mindful of teaching their nine-year-old Aiden the value of money. “Every time our son asks for something, we ask him questions like – ‘why do you want it?’ and ‘do you know how much it costs?'” they said. “We don’t give him everything he asks for, but make sure he gets what he needs.”

“When he was born, we did two things as soon as possible – got him a passport and opened a bank account in his name,” Freddy said. He added, “Any money he receives from relatives or friends for events such as Christmas or his birthday goes into his bank account. We don’t touch that.”

Priya R strongly believes that personal finance education should be made compulsory in schools as she believes that saving as a habit should be taught, from an early age. “In addition to teaching children algebra, formulas, geometry and angles, it is also important to instill in them the importance of saving, which is pretty much lacking in the education system today,” she added.

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