Often heard the term Systematic Investment Plan and wondered how can you get systematic about it? Fret not; cause reading on will tell you that investing in SIPs, as it’s famously abbreviated, is not just systematic but also very simplistic.
Setting up an SIP is a one-time activity that will help you invest in a disciplined manner periodically. It would be wise to start early on in your career but it is always better late than never. The reason why I am saying so is that if SIPs are started early, you need invest only a smaller amount, the investment grows as the years go by.
SIPs are offered by mutual fund houses as automated and recurring (daily, weekly, monthly or quarterly) investment schemes. If you are a salaried investor, you would want to consider staggered regular investments, preferably monthly, over a lumpsum investment. The fund house further invests them in equity (large cap, mid cap, multi cap) or debt linked instruments on your behalf. On an average, data shows, SIPs in well-diversified equity mutual funds have given compounded annual returns of anywhere in the range of 12 percent to 15 percent to those who invest for a period of five to twenty years. Hence, the key is to pick the fund house and the scheme that is aligned to your future life goals. Once you pick them, you will have to decide whether you would like to opt for a Dividend or Growth option. Only difference between them is that growth funds do not give dividends and therefore the NAVs of the growth schemes will be higher.
Besides being automated, easy on the pocket and providing handsome return, SIPs let you redeem your money at anytime and anywhere if you have to meet your sudden requirements. Moreover, SIPs do not concern you with the market volatility, as one of its features is ‘Rupee cost averaging’, which is, you get more number of units when the markets are low and less number of units when the markets are high. So the cost gets averaged. You may also consider investing in multiple SIPs to diversify your investment risks and optimise the returns.
So think of your SIP investments as laying of bricks month after month to build your dream home. It’s a perfect solution to convert your cash flows into capital as SIPs help you save for your future systematically. So start today with Geojit’s Funds Genie and make your wishes come alive.
Posted: September 2018