Mutual fund investment through systematic invest plan (SIP) is gaining popularity. The average return through SIP in last few years is 12 per cent. Though SIP is market-linked, it is one of the best options to help you earn profits and balance out losses. However, if you are keen to invest in mutual funds through SIPs, there are certain factors you should not ignore.
SIP Tips: Systematic Investment Plan (SIP) is becoming a popular investment option for many investors as it has been giving good returns for some years. The average return of SIP investment in the last few years is 12 per cent. Though the investments are market-linked, it is gaining traction since one can start investment through SIP with a fund as low as Rs 100, and Rs 500 in most cases.
According to experts, if invested in SIP for a long time, it leads to faster wealth creation.
E.g. Rs 10,000 investment a month through SIP for 20 years with a annualised return rate of 12 per cent can help you accumulate nearly Rs 1 crore in 20 years.
If you want to start investing through a SIP in mutual funds, there are certain things that you should keep in your mind.
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Start as soon as possible
The early you start, the more wealth you create.
If you want to create a big corpus through SIP, start investing in it as soon as possible.
Continue this investment for a long time i.e. 20, 25 and 30 years.
With that, your small investment can help you accumulate huge wealth.
Becoming a crorepati through SIP is also not a big deal if your investment is consistent and long.
E.g. Rs 10,000 monthly SIP for 20 years at 12 per cent return rate gives you Rs 99.90 lakh.
But if you extend your same investment for five years more, you get Rs 1.90 crore.
Be disciplined in investment
If you are investing money in SIP, then be disciplined in terms of investment.
Keep investing the amount every month on the fixed date, only then you can get good returns.
The formula of regular and disciplined investment is applicable not only in SIP but in all other types of investments.
Do not invest after watching market rise
SIP is a market-linked scheme, but still, it is considered less risky than investing money directly in the share market.
Therefore, in case of SIP, do not invest based on the mood of the market.
Some people start withdrawing money as soon as the market slows down, due to which they may suffer losses.
Keep in mind that in SIP, you get the benefit of rupee cost averaging.
That is, if the market is in decline and you have invested money, you will be allotted more units, and if the market is rising, the number of units allotted will be less. In such a situation, your expenses remain average even in case of market fluctuations.
Increase investment amount as income increases
One good thing about SIP is that you can increase or decrease the amount invested in it over time.
But if you want to create wealth, then keep increasing the amount invested in it from time to time along with income.
This will give you a lot of benefit in the future and you will be able to build corpus faster.
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Choose the fund as per your need
For what purpose are you investing in SIP, do you want to invest for short term or long term, keep these things clear in your mind.
While investing, chose a mixed portfolio so that some of your funds always perform better.
According to experts, your portfolio should be kept shining.
In such a situation, you should invest in gold and silver, equity, debt funds, real estate and mutual funds, etc.
You can also take help from a financial expert regarding that.
