How much should you invest in an SIP for travelling?

A systematic investment plan (SIP) is an effective route to attain your financial goals and form wealth over time. An SIP investment plan enables you to periodically invest a fixed investible in the preferred mutual fund scheme to offer you the benefit of long-term wealth creation and rupee cost averaging. 

While SIP mutual funds are commonly associated with financial goals such as purchasing a home or retirement planning, they can even be a prudent option for financing your dream of travelling abroad. Discussed here are the importance and stepwise measures of investing in an SIP to accumulate the desired travel corpus. 

Investing in an SIP for travelling abroad – 

Assess your travel goals and budget

Before determining the contribution to invest in the SIP mode, it is essential to evaluate your travel goals to decide on a realistic budget. Factor in parameters such as the destination you want to visit, trip duration, and estimated expenditures for transportation, accommodation, food, shopping, and activities. Having a clearer picture of your travel goals and budget can assist you set a prudent investment target. 

Evaluate your financial situation

Closely assess your financial circumstances. Factor in your income, expenditures, prevailing savings, and various other financial obligations. It is necessary for you to strike a balance between your SIP investment contribution and your potential to mitigate your daily expenses comfortably. Evaluating your financial situation will enable you to determine an investment amount that aligns with your income and expenditure patterns.

Consider the timeframe

The time available until your planned travel will significantly influence the amount you should invest in an SIP. A longer timeframe allows for smaller monthly investments, while a shorter timeframe may require higher monthly contributions. Consider the number of years left in your hand to accumulate the travel corpus and accordingly determine the investment contribution you can afford within the estimated time horizon. 

For instance, let’s suppose you plan to travel abroad in three years and have estimated the total cost of your trip to be Rs 8.62 lakh. Assuming an average annual return of 12% on the preferred mutual fund scheme, you can calculate the monthly SIP investment amount required through an SIP calculator. Using an online SIP calculator, you will find that to accumulate Rs 8.62 lakh in three years with a 12% annual return, you would need to invest approximately Rs 20,000 per month.

Stepwise approach to investing in an SIP for travelling abroad

Select the right mutual fund

Research and select a mutual fund that aligns with your investment goals, risk appetite level, and investment horizon. Consider factors such as fund performance, fund manager’s track record, expense ratio, and asset allocation.

Choose the SIP investment plan

Opt for an SIP investment plan that allows you to invest the desired amount at regular intervals, such as monthly or quarterly. Decide on the SIP duration based on your travel timeframe and financial goal corpus requirement. 

Set up SIP payments

Open a mutual fund account with a reliable fund house and set up the SIP payments. Provide the necessary details and authorise automatic deductions from your bank account to ensure a disciplined and hassle-free investment process.

Monitor and review

Regularly monitor the performance of your SIP investments and review the progress towards your travel goal. Adjust your SIP investment amount if necessary, considering any changes in your financial situation or travel plans.

Conclusion

An SIP investment is a prudent approach for financing your goal of travelling abroad. By evaluating your goal of travelling abroad, assessing your financial circumstances and factoring in the investment time horizon, you can decide the apt amount to invest in a preferred mutual fund through the SIP mode. With disciplined savings and the power of compounding features offered by SIPs, you can accumulate the necessary funds and achieve the corpus for your overseas adventure.