Some adjectives lose their sheen over a span of time. In the days of democracy, the adjective ‘king’ is still being used by the people as a tradition. Their monarchy is only in name. What is lost when social change comes is the meaning of the title of king. Words about economic prosperity have suffered a similar meaninglessness.

In the past, a person having Rs.1 lakh was called Lakpathi. Today, people in the Information Technology sector and government employees with five or 10 years of experience or officer rank receive a monthly salary of over Rs.1 lakh. Even then, no one calls him a millionaire. Even some is called that, it’s considered as a joke. If the one who had lakhs of rupees was a nobleman, the one who had crores of rupees was a millionaire. Even though Rs.1 crore still a huge amount, no one calls a person who has that much money a millionaire.

In the past, those holding Rs.1 crore were rare. People in those days saw such achievements as possible only for those with special blessings from God. Therefore, a person having a crore rupees was considered a millionaire. But today, with just Rs.1 crore, we may not even be able to achieve all our life goals.

For someone who is continuing with the goal of earning Rs 1 crore after 30 years of investment, it may seem that he is planning to earn a large sum of money, but that amount may not even be enough to meet his daily needs in future.

For example, suppose the current cost of living for a 30-year-old is Rs.3 lakh a year. He is investing in an equity mutual fund with the goal of retirement at the age of 60 after 30 years. Under the Systematic Investment Plan (SIP), he invests Rs.3,000 a month. The investment is targeted at Rs.1.05 crore after 30 years with an average return of 12% a year.

But will Rs.1 crore be enough for him to retire 30 years later and continue his retirement life smoothly? Assuming an average inflation rate of 60 per cent, he would need Rs.17.23 lakh a year for daily needs after 30 years.

At that time, if the interest he would receive from a bank for fixed deposit is six per cent and if he had deposited Rs.1 crore in the bank, he would get only Rs.6 lakh a year. If the tax is deducted, the return will decrease again. That is, he would get less than one-third of the amount he needs to live on by depositing Rs.1 crore in the bank. If you invest in a debt fund instead of investing in a bank, you can expect a slightly higher return, but you will not get the above amount.

If he wants to get Rs.17.23 lakh per annum with 60% return from the investment after 30 years, he has to have Rs.2.9 crore in his hand. If he continues with the existing SIP, he will have to get a return of 16.5 per cent per annum to get this amount. This is not easy to achieve. If the expected return is as high as 12 per cent, the monthly investment should be increased to Rs.8,500.

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Those who invest in Mutual Funds through a Systematic Investment Plan (SIP) should be aware of some basic facts. As the stock market moves higher, retail investors are more likely to invest. But no matter whether it is the stock market, or whatever asset may be, good performance should not be the only reason to invest. Instead, invest in a long-term goal. Investors should always be prepared for the possibility of ups and downs as volatility is a fundamental characteristic of asset sectors such as the stock market.

Those who make SIP investments in the long run should not stop investing from time to time. Even experts may not be able to pinpoint the exact way in which investments are withdrawn and reinvested based on assumptions about where the market is headed.

SIP investors should take care to adjust the investment period with certain objectives in mind. SIP regulates and mitigates the risk of market fluctuations. This risk increases as the SIP investment period draws to a close. Therefore, two methods can be adopted to reduce this risk.

One way is to shorten the duration of the SIP rather than the time to reach the goal. If you want to achieve your goal after 10 years, the SIP investment period should be eight or nine years. If the investment value has reached the amount you intend within this period, it can be withdrawn in whole or in part. If the stock market shows signs of turning negative in the last few years, the investment can be completely withdrawn.

Another method is to withdraw the investment gradually, just like investing under SIP. During the last years of the investment period, a fixed amount can be transferred every month from the equity fund to the debt fund as per the systematic withdrawal plan. The investment can be completely withdrawn from the debt fund when required.

Market fluctuations should not be underestimated. Fluctuation is a fundamental characteristic of the market. Long-term investors do not have to constantly monitor it. We use SIP as a safe way to overcome the volatility and make long-term gains. Investment decision making based on market fluctuations can adversely affect investment objectives.

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