It’s a dream of every investor to make the most of their mutual fund investments. They are always on the hunt for investment options that provide liquidity, capital appreciation, tax benefits, and ultimately aids to meet their financial goals and objectives. Yet, one cannot predict and fathom the volatility associated with market conditions, geopolitical, and/or social changes in a particular region. Considering these parameters, several investors decide to invest in equity mutual funds via SIP mode of investment. It has successfully become a desired choice for long term investing. Let’s quickly recall what is SIP
What is SIP?
Systematic Investment Plans (SIP), are a medium to invest in mutual funds. Under SIP investments, a pre-determined amount of money is allocated to desired mutual fund schemes for a given period of time at regular intervals. SIP mutual funds have the potential to generate significant returns over a prolonged period owing to rupee cost averaging and the power of compounding.
Here are a few tips that can make your mutual fund investments more productive the SIP way.
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Start Early
The power of compounding tends to work best when invested for an extended duration. So, make sure to invest in SIP as early as possible, hopefully with your first pay cheque to reap the most from the compounding effects.
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Try To Overlook The Volatility
The market and the economy are rarely in a stable condition. However, this should not mean that an investor stop investing during a market slump. In fact, a down cycle might favor the investor and yield substantial returns. Investing in mutual funds via SIP mode liberates an investor from worrying about the ups and lows in the market. This is because an investor invests in mutual funds despite the market condition.
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Use Multiple Investment Routes
It is always recommended to make a distinct investment portfolio for your varying financial objectives. The basic idea behind this is that it offers a sense of direction to your investments. In short, make a financial plan, and invest according to your risk profile, investment horizon, and financial goals. For your short-term financial goals like paying for tuition fees or planning a trip, consider investing in debt securities. Conversely, to meet your long-term financial goals such as saving for your child’s higher education or your retirement, make sure to include equity mutual funds in your portfolio.
Thanks to the advanced technology, you can now use an SIP calculator to perceive the future returns of your investments over time. Using a mutual fund return calculator is fairly simple and convenient. All you need to do is just input your investment duration, monthly investment duration, and expected rate of returns. Voila, your total corpus will be generated. The SIP calculator can also offer an investor with an estimate monthly investment. Happy investing!