The growing number of investors committing ₹1 lakh or more every month through systematic investment plans (SIPs) reflects rising awareness around long-term wealth creation, Agarwal said. However, he cautioned that the size of the SIP alone does not indicate whether an investor is on the right track.
Agarwal said, “It’s not really about the size of SIP, ₹1 lakh is just a number. It is for us to sort of feel good about us as a country, but ultimately that ₹1 lakh SIP doesn’t mean anything.”
Instead, Agarwal said investors should focus on what proportion of their income is being saved and, more importantly, how much of those savings is actually being invested. This is a more meaningful measure of investment progress, given the wide variation in income levels and financial circumstances among investors.
For investors who cannot start with a large SIP, Agarwal favours a step-up approach because it allows investors to increase their savings and investments as their income grows. This helps them gradually raise their investment contribution instead of having to start with a large SIP amount.
A starting SIP of around ₹44,000, increased by 10% every year, can potentially achieve the same investment objective as a ₹1 lakh monthly SIP maintained for 25 years.
He also recommended a core-and-satellite approach for equity portfolios. Around 70-80% of the money could be allocated to three or four core schemes, while the remainder can be used for satellite investments. Overall, five to six schemes could be sufficient for most investors, provided the portfolio is reviewed regularly.
Agarwal said investors should review their SIPs and funds every 12 to 18 months rather than making frequent changes based on short-term performance. He also warned against holding too many schemes in the name of diversification, saying a large number of funds can create overlap and make portfolios harder to manage.
For investors with higher incomes, Agarwal said asset allocation should depend not just on earning capacity but also on age, financial goals and when the money will be required. Investors with a long investment horizon can take a different approach from those who expect to need their money within five to seven years.
For the entire discussion, watch the accompanying video
