Weekend Bytes
SIP for your Trip!!!
Roti, Kapada aur Makaan – For decades, this has been a cliché for an average Indian’s needs. While, this troika is still relevant today in Indian consumers’ scheme of things, it is no longer the be all and end all for them. With increasing income levels and a rising middle-class, India is becoming an increasingly aspirational society. Indians today are moving beyond the basic needs (food, clothing, shelter) and have added things like a comfortable car, a second-home and dream vacations to their bucket list.
Although Indians have started saving and investing for aspirations like Car and Second-home, the same does not hold true for vacations. Mostly Indians still do not plan their finances ahead of time for a vacation/trip. In the age of social media, where one is bombarded with a plethora of exotic destinations to travel to, there is a propensity to plan trips on an impulse and then start looking for ways to finance the trip; often burning a big hole in the pocket. Some even go to the extent of getting a personal loan to fund such a vacation. Goes without saying that this is not a prudent approach considering the high rate of interest on such loans, in addition to the possibility of overspending beyond one’s means by borrowing.
As per a report by a leading online Travel platform, number of Indians taking more than 3 trips per year has increased by ~25% from 2019 to 2023. In view of this building a vacation corpus is not just a good-to-have in your financial plan but almost a necessity. You can do this as follows
> Identify the nature of trips you intend to take in the next few years (Domestic/International/Weekend Getaways)
> Shortlist a few locations and estimate today’s cost for these trips
> Adjust the above estimate for inflation (say a 10-15% buffer), especially for trips which are further down the time horizon
> Start an SIP in a Mutual Fund for the requisite amount to reach the desired corpus.
> Amount of SIP would be a function of your targeted corpus, investment horizon and assumed rate of return.
Which funds would be suitable for the purpose?
How does it work?
Say for instance, you intended to go for an International Trip in September 2024 with an estimated cost for 2 ranging between Rs 3.5 to Rs 4.0 Lakhs. You could have started saving for this trip around a year and half ago and started an SIP of Rs 20,000 in HDFC Corporate Bond Fund to reach your desired corpus.
The desire to travel the world is understandable. At the end of the day, there is no harm in enjoying the fruits of your hard work. Creating a travel fund can help you enjoy your vacations without compromising on your overall financial well-being, It can also help you to avoid going overboard with your spending as you would have budgeted your expenses in advance and created a corpus for it, thereby resulting in more disciplined spending. Next time you plan a vacation, well before you start shopping/packing stuff for the trip, you would do well to start an SIP for the same.
HDFC Corporate Bond Fund
SIP Performance - Regular Plan - Growth Option
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