Rahul started an SIP of Rs 10,000 a month in 2010, which was 20% of his income. He is still investing the same amount in 2019, which in only 5% of his income.
He is very impressed by the returns he has generated, but the important question is will it help him achieve his goals and make a meaningful difference in his life?
Like Rahul, for most people earning an income, they can usually afford to increase their SIP amount by 5 to 10% yearly, since their income also increases every year. This slight annual increment in SIP would SIGNIFICANTLY payoff come the day you need the money and redeem.
The point is: For an investment to meet your financial goals, just a high rate of return is not enough. It should be able to reach the actual amount that will help you move towards your goals.
For most people who equate savings to fixed deposits, it is natural and intelligent to try something new like equity with a small initial investment. However, there is little benefit in trying it out for a decade. If this is a better investment avenue, then as Nike says: Just do it.
One good rule of thumb is the 50:30:20 rule. Spend half your earnings on your NEEDS, 30% on your WANTS and 20% on your financial GOALS.
