SIP or Systematic Investment Plan is a type of mutual fund vehicle offered by various mutual funds to investors, to invest small sums of money periodically instead of investing the whole lump sum amount. The frequency of such investments varies from weekly to monthly or quarterly. If you are new to the Systematic Investment Plan, it is a good idea to stick to the monthly investment plan as your salary is reimbursed to you on a monthly basis.
Depending on your chosen frequency of investment a fixed amount which has been predetermined by you will be auto-debited to one or more Mutual Funds of your choice from your Bank Account. You can always ask your Bank’s relationship manager for a list of Mutual Funds you can invest in and the returns you will get from your chosen Mutual Fund. The relationship manager can also advise you about the Top SIP plans available in the market so that you can make the correct decision. Here are some of the tips you should keep in mind when choosing a SIP plan:
1. Do a little Research:
A little research can sometimes go a long way in saving you from costly mistakes. It is always a good practice to find out more about the fund house where you plan to invest your hard earned money. Fund houses, mostly act as an agent, pooling in money from a wide range of investors and then investing them in profitable mutual funds at their discretion. It is their decision that defines our future returns. If the fund house fails to provide you with the promised return or fails to deliver, you may lose faith in mutual fund investments altogether apart from inducing heavy losses. So, it is important to understand the schemes they provide along with the type of investments they make, etc.
2. Check your Investment Objectives:
Investors usually invest in Mutual Funds with a set goal or objective that they would like to fulfil through the returns they get. The goals you set may be short term spanning for a few months or long-term spanning for a few years. Whatever, your investment goal and objective is, you should keep yourself updated with the Top SIP plans in the market, so that you can gain maximum profit out of your investments. Your investment objective also clarifies your risk appetite and further lays down the foundation of your investment portfolio.
3. Be thorough about additional expenses:
Mutual Funds in addition to their actual investment cost also carry additional fees and taxes. However, many investors investing in mutual funds through fund houses tend to overlook these additional costs. Ideally, the bigger the fund house is, the lower the recurring costs will be. When investing in mutual funds through the SIPs, it should be kept in mind that SIP’s follow the ‘First in, First out’ method of redemption. That is the funds that are purchased first, are liquidated first.
4. Know your fund performance:
Not all funds perform equally in the financial market. Some funds may garner exceptional results, and some may fail to provide satisfactory returns on investment. As an Investor, you should always judge how a fund will perform in the market based on its previous long-term performance in case of equity mutual funds and short-term performance in the case of debt funds. As an Investor, you should avoid investing in funds whose returns are very volatile. Investments with a consistent track record are sure to yield you good returns.
5. Discipline is the key:
It is easy to begin investing in Mutual Funds, but it is tough to be consistent in investing. You should try to avoid spending haphazardly as much as you can and should focus investing more in the market to gain better returns in future. A good practice is to set up an investment schedule and follow it diligently ensuring that some cash is kept aside for emergencies and to maintain a good investment record. Investing in SIPs is one such good option in such cases.
Indians can opt to invest in over 5,500 Mutual Fund schemes like for instance, in equity, debt or even gold schemes. However, there are a lot of factors that you must keep in mind when you are investing in SIPs. The points mentioned above will help you make the right decisions so that you can gain maximum returns from your investments.