- The Power of Compounding: It is said that the power of compounding is the 8th wonder of the world. Since the returns from your investment depend directly on how long you are invested, it is vital to start as soon as possible. Mr. Amit understood the importance of this when he earned Rs. 88,000/- more by starting his investment just 2 years earlier than Mr. Balaji. For example, Mr. Amit started investing 2,000/- monthly today, and 7 years later, his investment grew to 2.44 lakh with the power of compounding. Whereas, Mr. Balaji started investing 2 years later, and his investment grew to only 1.56 lakh. Mr. Balaji could have earned 88,000/- more had he not delayed his investment by 2 years.
- Rupee Cost Averaging: It is impossible to time the market for the best time to invest, and that is why most people tend to delay their investments. Monthly investment plans use rupee cost averaging, which does not require the investor to wait for a good time to start investing. Rupee cost averaging evens out market ups and downs in the long run and allows you to get a better return on the investment over some time. By investing a fixed amount of money every month, you buy more units when prices are low and fewer units when prices are high. Therefore your final weighted average cost remains lower than the average unit price.
- Convenience: You can send a one-time instruction to their bank to facilitate auto-debit from your savings account, credit card, or debit card. You can, thus, make investments without worrying about missing the investment due date. You can even buy monthly investment plans online in the comfort of your home. It would just take about 10 minutes of your time.
- Disciplined Saving: Discipline is the most important thing when it comes to making any investment. Many times, people start investing with great enthusiasm but fail to keep pace with time. Instead of investing a lump sum amount, you can invest a smaller amount every month which is easier to do. Since monthly investments happen automatically, you don’t need to interfere regularly. You can continue saving for a long time, and your money can grow a lot faster.
- Tax Planning: Monthly investment can make your tax~ saving targets easy to achieve every year. All you need to do is buy a monthly investment plan and set up auto-debit instructions online, and you are good to go!
When you choose Unit Linked Insurance Plans (ULIPs) as your preferred monthly investment option, you get all this and more!
How to choose the right amount to invest?
Below are some key factors that can help you determine the right amount to invest:
- Financial goals
While purchasing an investment plan, it is important to consider the financial goals you want to meet with the returns of your investment. You may have goals such as buying a house, traveling, your child’s education or marriage, financially independent retirement, and more. Identifying your financial goals can help you calculate the amount you would need to invest to meet them. - Planned expenses
You may have some planned expenses that you would have to meet in the short term. For example, you may have planned to renovate your house, buy a gadget, pay your child’s tuition fees, and more. It is important to calculate the amount you would need to meet these expenses and set that amount aside while choosing the investment amount for your plan. - Current expenses
Having an understanding of your current expenses can help you calculate your investment amount better. Your current expenses may include your household expenses, EMIs, daily travel expenses, and more. If your current expenses are lower, you can consider investing a larger amount in your plan to meet your financial goals better. - Financial dependents
While calculating the amount to invest, it is important to consider the number of people in your family who are financially dependent on you. For example, you may have one child, two children, dependent parents, or even dependent siblings. The amount you invest in your plan will vary accordingly. Keeping the above factors in mind while investing can ensure that you invest the right amount to be able to meet your future financial goals without compromising on your current financial needs.
