Using Asset Allocation Funds For Financial Freedom

The tool of Systematic Investment Plan (SIP), widely used by long-term investors, is an effective way to create wealth as it keeps consistency and steadiness in the investment journey. Irrespective of the market conditions, SIP facilitates investors to keep averaging their investment costs with small but consistent amounts; thus keeping the portfolio relatively stable during challenging times.

Though investments through SIP have quite a long and well-established performance track record, it is often observed the majority of the investors start SIP without realising the importance of goals. This, in turn, results in termination or stopping of SIPs mid-way, either due to panic in the market or to take care of unexpected or unplanned fund requirements. Thus, the very purpose of investment gets defeated, often, in an abrupt way.

It is where Freedom SIP, an innovative add-on feature which is a blend of two solution-based tools - SIP and SWP - comes in, in an effective manner. It offers a goal-based investment planning solution. ?Basically, Freedom SIP works in three parts — Grows your wealth through SIP route for the tenure you choose, switch to a target scheme post the SIP tenure completion and lets investors reap the benefits as monthly income through SWP till your accumulated units last. The monthly withdrawal is also planned and is available in multiples of the SIP amount.

Basis your goals, Freedom SIP has a tenure of 8, 10, 12, 15, 20, 25 and 30 years. If SIP amount is Rs 10,000 for a tenure of 8 years, the Freedom SIP feature will let you have a systematic withdrawal of Rs 10,000 per month post the tenure. If tenure is 10 years, the withdrawal will be 1.5X or Rs 15,000. From the tenure of 12 years onwards the 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.

Thus Freedom SIP not only helps investors stay focused on their goals and complete the tenure, but also helps to reap benefits of their long-term investments in a systematic manner and enjoy financial freedom.?

When Freedom SIP gets a tint of asset allocation, the outcome could be even more rewarding. It is advisable that all long-term investors must exercise asset allocation strategy to ride the various market cycles in an efficient and stress-free manner. Given the fact that all asset classes have distinct features and different market cycles, asset allocation allows investors to get the optimum benefits of all asset classes in an optimal manner.?

For a lay investor, keeping track of the various asset classes, allocating in an optimal manner and rebalancing when required can prove to be a challenging thing. Helping an investor address such situation is the asset allocation funds. Such schemes actively track valuations of various asset classes and follow a dynamic asset allocation process. As a result, investors get a diversified portfolio reducing asset concentration risks while the long-term wealth creation journey continues in a disciplined way. It is worth highlighting that such funds come with an in-built feature of regular monitoring and re-balancing of investments which helps an investor get optimum benefits various asset classes offer.

If you are an investor considering to go the Freedom SIP way, then utilize the efficiency of such asset allocation scheme by making it a part of your portfolio in the form of a target scheme. Use this scheme as a holding fund from which the monthly withdrawal will be triggered. In this manner, even if equity as an asset class turns volatile you need not have to worry given that the exposure is calibrated in nature.?

To conclude, use Freedom SIP and asset allocation schemes to your advantage for a stress free investment journey and successfully fulfil whatever financial dream one may harbor.?

Author:?Rajesh Shetty,Director,WW FINANCIAL DISTRIBUTION PRIVATE LIMITED