Invest your way to financial freedom using Freedom SIP By Raghunath Parekh, Owner, Samruddhi Investment

Setting short, mid and long-term financial goals is an important step toward becoming financially secure. The biggest long-term financial goal for most people is saving enough money to retire comfortably. Many wish to retire early or have the financial freedom to follow one’s passion and live the life they imagine for their sunset years. But early retirement is no mean feat. Besides, given the rapid advancements in medical science, life expectancy continually improving, and new nuclear family set-ups, it’s even possible that one may run out of money during the retirement years.  

However, if one plans from the early days, there are many ways to build a retirement corpus. One of the easiest ways is to start a long-term systematic investment plan (SIP) in an equity fund and keep investing throughout one’s working life. The key to financial independence is starting early. And helping you in this journey is a feature called Freedom SIP launched by ICICI Prudential Mutual Fund.  

What is Freedom SIP? 

Freedom SIP is a blend of SIP and Systematic Withdrawal Plan (SWP) that can help investors achieve their retirement goals in a planned and seamless manner. This feature allows an investor to set up SIP in a fund for a specific duration, which can be anything from 8 to 10,12,15,20,25, or 30 years. Ideally, the scheme chosen from long-term SIP should be equity-oriented. Once the SIP period is over, the amount gets switched/transferred to another scheme which is either debt-oriented or hybrid in nature. This is done so that the corpus created can be protected from equity market volatility. Thereafter, the SWP process starts from this fund and continues till there are units available.  

In the case of SWP, the monthly SWP amount will be a multiple of the initial SIP amount. For a SIP tenure of 8 years, the monthly SWP instalment will be the same as the SIP amount. Increase the SIP tenure to 10, 12 or 15 years, the multiplier on the SIP amount will be higher. For instance, a Rs 10,000 per month SIP for a tenure of 15 years will lead to an SWP of Rs 30,000. In effect, the feature allows one to grow wealth through SIP and reap a monthly cash flow through SWP. There is also an option to top up the SIP amount. This will ensure that one’s corpus goal is achieved faster.  

Benefits of Freedom SIP  

Inculcates Discipline: Freedom SIP encourages investors to invest for a minimum duration of 8 years to 30 years, depending on one’s requirements. It inculcates the habit of long-term investing. Most often, in the case of a normal SIP, investors tend to pause or stop their SIP during volatile market conditions or when there is a sharp correction seen in the market. By investing from 8 years to 30 years, one gets to accumulate a large number of units over a complete market cycle. This aids in averaging the holding cost.  

Automate SWP: When you avail Freedom SIP facility, you don’t have to worry about setting up an SWP manually or deciding the ideal SWP amount required each month. Here, the entire process is done in an automatic manner, which is part of a one-time process. 

Creating Cash flows: The SWP here is akin to creating a sustainable secondary cash flow for meeting one’s financial requirements. The beauty of the feature is that while the required number of units are redeemed from time to time, the remaining units continue to remain invested and gain from market movements, thereby ensuring that the corpus is not stagnated. 

To conclude, Freedom SIP is an excellent tool in the hands of long-term investors for disciplined investing and meeting long-term financial goals like retirement planning without hassle. The facility not only helps in automating savings cum withdrawal but also helps in achieving financial freedom in a hassle-free manner for one’s retirement years. One can thus get predictability in terms of cash flow to meet daily needs comfortably.