The money you earn has many claimants such as rent, EMI, bills, education, shopping, child expenses, travel, purchases, health expenses, and so on. You may want to invest the surplus in the hope of wealth creation but might think that it is too little to invest. However, it does not matter how much you invest, what matters is that you start.
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If there is no particular goal in mind, you may end up redeeming your investment as and when there is a need for money. That is why determining the goal of your investment is the most crucial factor. It is essential to know why you want to start the SIP – Is it for the corpus that you wish to create for your retirement or for the higher education of your kids or the home you want to build or maybe your dream car you want to buy. Once you are clear about what the goal is, you should start with SIP.
Why Invest in SIP?
Mutual fund investment may seem complicated if you are a first-time investor, as it can be confusing at times. You must first understand how mutual funds work to begin your investment journey. Investing via Systematic Investment Plans (SIP) is advisable for those investing in equity instruments for the first time. A lump sum investment can expose you to the risk of catching a market peak; a SIP allows you to spread your investments over time and invest at different market levels.
Systematic Investment Plan (SIP) is a method for investing a fixed sum of money, regularly in liquid, debt, hybrid, and equity mutual fund schemes. SIP provides the versatility of multiple asset classes and the potential for better returns. An accumulation of investments for a considerable period through the SIP route powered with compounding could generate the desired results.
Here are some of the benefits SIP offers:
- Systematic and disciplined investment approach
- No need to time the market
- Power of compounding
- Tax-saving with systematic investing
- Rupee Cost Averaging – that lets you benefit from volatility
Things To Consider Before Investing Through SIP
- Know the money value of your goal
Having a list of goals is not enough to turn them into reality. You have to ascertain the money value of the target by determining what the present cost is and what is likely to be the future cost of this goal. Therefore, first, determine the future cost of the goal.
- Is it short, medium or long term goal
Defining the investment horizon of the target will let you determine the investment you make in the present time to attain the required corpus in future value. In Mutual Funds, you can select from Blue Chip Funds, Liquid Funds, Equity Funds, and Debt Funds. Liquid funds are ideal for a short term goal as they provide returns in a short investment horizon. Partial investments in debt and or equity funds or balanced funds are crucial for medium-term goals. And for a long term goal, you can depend more on equity-oriented mutual funds.
- Choose the right scheme for your SIP
The process of investing in mutual funds can be tedious and overwhelming. There are thousands of mutual funds to choose from, and you need to monitor the performance of the funds too.
You can start your SIP at any time from reputable financial institutions such as Axis Bank. They provide a choice to start a SIP in the registered mutual fund schemes of the top Asset Management companies (AMCs). You can also use SIP calculators available online to know the expected returns on your investment. You can start small, and there is no need to have a lot of money to start SIP. So, begin your journey as an investor and plan your life goals well.
