Systematic Investment Plans: The preferred method of investing for the majority of investors in mutual funds is systematic investment plans (SIPs). The total number of mutual fund SIP accounts was a staggering 6.97 cores as of August 2023. In contrast to the 19.59 lakh existing SIPs that were terminated (including those whose terms had expired), 35.92 lakh new SIPs were registered. Over the past few months, there has been an increase in the number of SIP closures per month. The monthly SIP closures were 13.21 lakhs in April 2023 (the beginning of the fiscal year). Let’s examine how you might extend the duration of your SIPs and get the most out of them.
The Power of Starting Early
Ideally, you have to begin investing as soon as you begin to make money. It provides your mutual fund SIP enough time to get the long-term benefits of compounding. The likelihood of generating larger returns and accumulating more money increases with a longer time horizon.
The Role of Goal-Linked SIPs in Building Wealth
Each SIP should always be linked to a particular monetary objective. Building a retirement or education fund for a kid, saving for a down payment on a home, starting a business, and other financial objectives are just a few examples. There won’t be any temptation to redeem your SIPs until the financial target has been reached if you link them to your financial ambitions. You’ll become a diligent long-term investor as a result.
Elevating Your Wealth Building with Incremental Investment Growth
You have the choice to annually increase your SIP amount using a step-up SIP. The annual increase may be either a fixed sum or a percentage of the initial sum. You can raise your SIP investment by 5–10% each year in accordance with an increase in your yearly income.
Why Staying Committed to SIPs Trumps Timing Strategies
There will be times during your investment journey when the market will increase significantly quickly. Additionally, there will be times when the market will unexpectedly crash. Some investors attempt to anticipate these market shifts and adjust their investment strategy as necessary. They either initiate new SIPs or halt or redeem their current SIPs. They attempt to time the market, which is challenging. Even the most knowledgeable professionals occasionally misjudge market timing. In order to avoid skipping any SIP, you should never attempt to time the market. The long-term benefit of rupee cost averaging (RCA) is provided by a SIP. You purchase more units when the NAV of your mutual fund scheme decreases as a result of a market decline. The total value of your units increases when the NAV of your mutual fund scheme increases as a result of a rise in the market.
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