In this article, Sourabh Jain from Magnum Finvest Services explain Freedom SIP and its benefits.
Fulfilling life's various financial goals in the stipulated time while enjoying financial independence is what is called successful financial planning. Investments through mutual funds in a systematic (SIP) way has established a strong performance track record of creating long-term wealth.
Having said that, investments without goals can neither be long-lasting nor effective for wealth creation. It is here that ICICI Prudential Freedom SIP comes to the rescue of investors and plays a significant role in fulfilling the goals in a stress-free manner.
ICICI Prudential Freedom SIP lets investors have financial freedom to pursue what they always desired to do after a certain period of time. It helps keep the wealth creation journey on track, keeps you goal-focused by inculcating a disciplined habit of systematic investment.
Simply put, Freedom SIP is an innovative add-on feature which offers a blend of Systematic Investment Plan (SIP) and systematic withdrawal plan (SWP) while helping investors meet their financial goals by offering a goal-based planning solution. It works in three stages — Grows your wealth through SIP route for the tenure you choose, Switch to the Target Scheme post the tenure and finally lets investors reap the benefits as monthly income through SWP till the accumulated units last. Interestingly, the monthly withdrawal is in multiples of the SIP amount. The tenure ranges from 8 years to as high as 30 years.
If your SIP is Rs 10,000 for a tenure of 8 years, the default systematic withdrawal will be of Rs 10,000 per month post the tenure. If tenure is 10 years, the default withdrawal will be 1.5X of SIP instalment at Rs 15,000. From the tenure of 12 years onwards the default monthly withdrawal will rise in multiple from 2X or Rs 20,000 to 12X or Rs 1.2 lakh for the SIP tenure of 30 years.
It is generally observed that the majority of investors end up either terminating their SIPs mid way or redeem their units. Such an investment behaviour immediately puts an end to the wealth creation journey and the sole purpose of investment stands defeated.
Freedom SIP endeavours to help investors avoid such a situation. During the chosen tenure an investor is in an accumulation phase of units, an important stage, wherein the money grows with time and gets cost averaging benefits. Post the tenure, investors are unsure about how to go about the accumulated wealth. They either withdraw completely or keep the sum untouched. The second stage of Freedom SIP kicks in here. The corpus created is switched to a target scheme in a hassle free manner. Generally, the risk profile of the target scheme is lower than the initial scheme.
In the third and the last stage, reaping of the investment benefits kicks in a systematic manner through SWP. A continuous monthly payment through this mode is almost like an additional income which can be put to use for various needs by the investors. This gives investors a sense of freedom to utilise the amount whichever way one wants.
ICICI Prudential Freedom SIP prevents the pitfalls of redeeming units in one go by allowing the remaining units to grow over time. Its SWP feature helps avoid mismanagement of large sums, ensuring that investments mature effectively. These built-in features of Freedom SIP make happy investors while they attain financial freedom.