Target Investment Plan (TIP) is an innovative and intelligent investment strategy that works similar to a Systematic Investment Plan (SIP) in terms of a regular periodic investment, but differs in the amount invested in each installment.
You can start your TIP by setting a Target amount and expected rate of return over a period of time. Let us take an example to understand the concept.
- Assume you have chosen Rs. 3 Lac as Target to be achieved in 24 months with an expected return of 9%.
- The average monthly amount required to achieve the target would be Rs. 11,500 every month.
- Supposing after the first month, the market is in a downward trend, and the portfolio value falls to Rs. 9,200. In such a case, the second installment would not be Rs. 11,500, but would be Rs. 13,800, i.e. [(11500*2)-9200].
- After the third month, suppose the markets rise and the portfolio value now is Rs. 27,000 then Rs. 7,500 i.e, [(11500*3- 27,000)] will be invested.
- Thus TIP establishes the target portfolio value by periodically calculating the investment amount, and bridging the gap between the target value and the actual portfolio value.
- To know more about ‘Target Investment Plan’
