Make your goals inflation proof

Written on Tuesday, September 22, 2015
By Vishwajeet Parashar- Senior VP & Group Head - Marketing, Bajaj Capital Ltd.

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We all have certain plans for our future, certain goals to be achieved and to fulfill them we need money. Be it further studies, marriage, child's education, buying a car, big house or even a luxury holiday, if we start planning our goals, it becomes easy to achieve. Systematic Investment Plan (SIP) is solution for all your dreams without burning hole in your pocket. SIP regularly invests a small sum into Mutual Fund Schemes that would help you create wealth over a period of time.

But if you miss out the inflation factor, probably your calculation would turn out to be faulty. Let's start with few examples to help you understand the concept better.

1. You want to buy a car after 5 years, worth Rs. 7,00,000/-

Assuming a return of 12% the monthly investment you would need in SIP is- Rs. 8571 but after 5 years inflation would not be the same. So, let's make your investment inflation proof. If we calculate inflation at 8%, in that case the car which currently costs you 7 lakhs would inflate to 10,28,530, so to achieve your dream of car without feeling the burn of inflation invest 12,594 every month.

2. Planning to visit Europe for a family vacation after 7 years

This trip would include you along with your wife and let's say two kids. It would cost you around 6 lakhs and to achieve this goal you need to invest Rs. 4592(Assuming returns at 12%) every month in SIP. Now let's add the inflation part, after including the inflation at 8% this trip would cost you Rs. 10,28,295. So, make an investment of Rs. 7869 and this dream of yours will soon be reality.

3. Higher education of for your children

Let's say you need this money after 15 years for sending one of your kids to a world class business school. Today, a good college (IIM) for MBA means an expenditure of 20 Lakhs. This goal is easily achievable with monthly investment of Rs. 4003, isn't it exciting? But to make sure your plan is flawless, add inflation to it. Assuming inflation at 8% this cost would inflate to a whooping Rs. 63,44,338. But you have a long tenure of investment for this goal, so make a monthly investment of Rs. 12,699 and send your kid to his dream college.

4. You have a dream of owning a house, Right?

Suppose this would cost you 50 Lakhs and you want 15 Lakhs for down payment. You have 10 years to save this amount. To make it a reality would need an investment of Rs. 6521 every month. But that would not serve the purpose as inflation would eat up our investment, so to shild it from inflation you would have to save Rs. 14,078 every month as the amount of 15 Lakhs would inflate to Rs. 32,38,387 after 10 years.

If this sounds like your dream, start your SIP journey today. Click Here to personalize your investment calculation according to your goals and to know what amount you need to invest.


#Mutual Fund invest is subject to market risk, read scheme document carefully before investing. 

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