SIP Investments: Mutual fund investment via a systematic investment plan (SIP) is gaining popularity since it allows people to start with a little amount of money, provides compounding, instills discipline for saving money, and provides the flexibility to cease investing at any time. One of the benefits of SIP investment is that even if the market is low and you continue to contribute, the recovery is substantial when the market rises. SIPs have yielded an average return of 12% in recent years.
Low Entry Point with Rs 100
Another advantage of investing via SIP is that you can begin investing in many funds with as little as Rs 100. Though mutual fund returns are affected by market conditions, fund selection, and contribution quantity, there are techniques to maximise your SIP investment.
Early SIP Investment Advantage
If you begin your SIP investment journey early and have the patience to invest for a long time, you may amass vast fortune by the age of 50. If you start investing Rs 10,000 per month at the age of 25 and earn a CAGR of 12% over the following 25 years, you will have invested Rs 30 lakh in those years while expecting to earn Rs 1.90 crore. That means you’ll have nearly Rs 2 crore in your corpus by the age of 50.
Financial Discipline Through SIP
Because you must invest a particular amount in your SIP every cycle, you develop financial discipline. It’s a nice practice, but individuals are let down when the market falls and their mutual fund investments turn red. Many of them discontinue SIPs at that point. That was a huge oversight; it should have been the opposite. It’s time for them to top up their SIPs.
Flexible Investment Strategy
If you put Rs 10,000 in a SIP now, you can raise your investment as your income grows. An effective strategy is to boost your SIP by 10% each year. Every year, you can change that amount to your income.
Customizing Investment Approach
Depending on your objectives, you can choose between aggressive, moderate, and conservative investment planning, but it is always recommended that you diversify your investments to a large extent. You can certainly have large, mid-, and small-cap mutual funds in your portfolio for higher returns, but you should also keep a healthy mix of debt, flexi-cap, contra, and ELSS funds in your portfolio to offset market risks.
Setting Clear Investment Goals
When you first start out, it might be difficult to predict which funds will produce positive outcomes in the future. However, you can select your fund based on your investment objectives. Before investing, consider whether you want to buy a car, a house, develop money, or save for your child’s education and marriage in the long run. Before selecting the correct funds, you can conduct due diligence on the fund house, stock portfolio, tenure of the fund, and performance over the last three years. You can also consult with certain consultants.
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