Target Investment Plan

TIP is an innovative additional to mutual fund scheme. It is like a SIP i.e. investing opportunity for a determined period on a regular basis with a set target. TIP helps you to invest with target set plan and time period. Financial goals like buying a house, car or educations of child, can be achieved through this TIP.

TIP key principle is that “TIP invests less when prices are high and invest more when prices are low” which helps in averaging the investment value. The longer the period of investment the better is the opportunity of achieving the target.

Some of the key features of TIP are:

  • Plan goal to be achieved, its target amount and its time period.
  • Set an average monthly investment amount details and additionally offers for providing a maximum amount.
  • Investing more when prices are low and investing less when prices are high.
  • TIP often tends to give more returns as compared to SIP (SYSTEMATIC INVESTMENT PLAN).

Suppose you have a house to buy after 7 years assuming its fees to be paid is Rs 1cr, you can start your target amount as Rs 1cr.

TIP Dates Opening Portfolio RS Monthly Installment Rs Closing Portfolio Rs Remarks
7th June 2017 0 77,000 77,000 This is the first installment.
7th July 2017 70,000 84,000 154,000 Portfolio Value went down hence the monthly installment went up.
7th August 2017 170,000 61,000 231,000 Portfolio value went up hence the monthly installment went down.
7th September 2017 220,000 88,000 308,000 Portfolio Value went down hence the monthly installment went up.
7th October 2017 320,000 65,000 385,000 Portfolio Value went up hence the monthly installment went down.

One can cap their maximum installment in TIP. The first investment amount will be equal to average amount of investment.

Thus TIP establishes target portfolio value by calculating the investment amount periodically and bridging the gap between target value and actual value.

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