What to do with your money when your SIP matures?

How to select the best investment option when you have the matured amount of a SIP in hand?

As the name suggests, a Systematic Investment Plan (SIP) allows mutual fund investors to invest small amounts regularly over time. It brings in discipline to the mutual funds investment style and delivers long-term results, thanks to the power of compounding and average costing. As you continue to contribute every month to your SIP, the fund amount accumulates to become a significant amount at the end of the tenure. 

With the help of a SIP maturity calculator, you can decide on the regular contribution you need to make to achieve a particular SIP maturity amount. And at the end of the SIP tenure, when you have the mutual fund redemption amount, there are various ways you can put it to good use.

1. Extend your tenure 

If you are satisfied with the performance of the SIP and don’t have any other pressing financial obligations, you can opt to extend the matured SIP investments. SIP is a flexible form of investment. You can increase or decrease the tenure as well as the monthly installment, depending on your financial situation. Many investors choose perpetual SIPs, which continue till the time you decide to invest. Investors can also pause their SIPs temporarily during the tenure. So, in a nutshell, SIPs are flexible and liquid investments that can be easily extended upon maturity.

2. Reinvest in different assets 

To keep the amount productive, the best course of action would be to reinvest across different assets. You have to assess your preferences in terms of risk profile and pick the right investment options. Lump-sum investment in shares or mutual funds is a good option if you want to cash in on market-linked growth. On the other hand, if you are nearing retirement and/or want a more steady and certain income, traditional investments like bank fixed deposits, government bonds, national savings certificates etc. offer a safer reinvestment option. If the amount is substantial, you can even make investments in real estate and try to line up a steady rental income. If you want your investment to be liquid, gold is another alternative.

3. Meet financial goals 

You may have started investing in an SIP to achieve certain financial goals. It could be to finance your child’s education, buy a bigger house or a car, or go on an overseas vacation. Priorities may change during the SIP tenure, but if life goes as planned, you may be able to meet the financial goals that you wanted to achieve. The matured amount can also be used to pay off any outstanding liabilities and get rid of any interest costs that you may have been incurring.

Last words

To sum up, if you are satisfied with your fund manager, you can continue with the SIP. Reinvesting in different assets could see you investing in stocks, government investments, or other fixed assets. Using the entire fund investment on expenses in your wish list is another way to go about it. But whichever way you choose, consider all the options and have clarity about your financial needs and purpose before taking a decision. Maturity benefits: what you need to know when buying insurance

Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas.