One of the most usual reasons why any investor starts investing is because he/she needs to save taxes, build a corpus for the future, or just because there is surplus cash in his bank account. These days, one more reason has been added to the list. It is, “let’s catch up with the trend.” Most of us invest for the first time because our friends have suggested us to do so. Isn’t it? The trend is prevalent among the mutual fund investors. If you too have started a SIP just because your friends were doing it, then it’s a journey without any fixed destination.
People, undoubtedly, have started recognizing mutual funds as the new investment avenue due to the wide popularity it is gaining in time. However, not all have the right knowledge of the product. So, when the investment is made for the first time, they’re often done without a purpose. Here’s a guide to all such investors who have initiated investment in SIP to help them learn what should be their next moves!
- Timely Assess Your Risk
Many people get jittery when they watch their investments losing value with each passing day. When the SIP investment is made for the first time, people usually do it without a set plan, and thus they tend to choose products that are contrary to their risk appetite. But as you’ve already invested, so, what you should do is assess your risk holding capacity from time to time. If your investment is producing greater negative returns which are somewhere forcing you to redeem your investment, then it’s time to seek guidance from an expert and switch your investments to some other scheme(s)
- Gradually Increase Your SIP Investment
With time, you will get some pay raise, and even your monetary goals will develop. Thus, it is crucial to keep checking your investments and make sure that they are enough to fulfill all your upcoming financial goals. Systematic Investment Plans offer the facility of Increase SIP where one can start the SIP with a lower amount and then gradually increase the amount year on year. This method looks more realistic as one’s income also increase over time and the ability to invest too increases. This way, one can fulfil any goal even before the set time limit.
Let’s take an example to prove why slowly and steadily increasing the SIP amount can help you make even bigger wealth.
Assuming that you’re investing Rs 5000 every month in a fund for the next twenty years. Also, you’re expecting the moderate return of about 12%. After 20 years, you will end up making a corpus of around Rs 50 Lacs. However, if you would have topped up your SIP investment with just Rs 500 annually, then you could have accumulated 80 lacs. Hence, adhering to this formula of increasing SIP amount gradually can help you to accumulate exceptional wealth in the long run.
- Diversify- Introduce a Financial Plan
When you started investing in SIP for the first time, maybe there was no plan, or maybe there was. But with time, your needs would have changed or increased and so is your salary. So, it’s time you introduce yourself with a complete financial plan. Write down all your monetary needs which you want to fulfill in the coming years. These could be for your education, child’s future/education, marriage, retirement or even short-term plans such as vacation or buying a car. Now, make a comprehensive plan as to how you can achieve them. If you can’t do it for yourself, try taking help from an online or offline expert.
Mutual funds, these days, offer the best of plans for varying needs. So, you must take the full advance of the avenue and generate the best of returns for your different goals. Besides, get yourself introduced to diversification, don’t just invest in one kind of scheme. This will help you to seek the benefit of better returns even when one asset class of the market doesn’t perform well.
- Stick to Your Investment Objectives
Determining the goal is the most important thing when it comes to investment. One can only manage investment by trying to achieve financial objectives while staying within the constraints of resources available. If you don’t know where you are heading, you will never be able to reach your destination, and the same is true for investments as well. To fulfil the set investment objectives, one must evaluate one’s risk appetite timely. While some are satisfied by investing in a low-risk instrument; low-return schemes, others are willing to endure short-term loss for potential gains in the long-term. Decide what you want with your investments in SIP, and then work towards it every day.
These were a few of the additional steps that you need to take care of once you have initiated your SIP investment. SIP helps you to inculcate a great habit of investing regularly, so as you take care of your health in a routine way, it is also important to take care of your financial health the same way. It’s time you too take your SIP investment to the next level by taking moves ahead, enjoy multiple benefits such as the power of compounding, rupee cost averaging, inflation-beating returns, and tax efficiency, and finally shout out loud – Mutual Funds Sahi Hai !