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How to make the most of Mutual Fund, Sip: Top tips

To ensure financial security in the long run, investing in mutual funds can prove to be extremely helpful

Friday August 14, 2020 6:11 PM, ummid.com News Network

SIP Investment Tips

To ensure financial security in the long run, investing in mutual funds can prove to be extremely helpful. Living in the moment is good, but saving enough finances for you and your family’s future is also crucial. The best way to ensure enough capital for your future is by investing your money. In fact, investing since a young age helps to develop the habit of control spending by focusing on your budget and cutting down on expenses, wherever needed. There are various investment options available to an investor, one of them being mutual funds.

You can invest in mutual funds via 2 ways – lumpsum mode or SIP mode. Lumpsum investment is when an investor makes a one-time investment in their preferred mutual fund schemes.

What is SIP? SIP, or Systematic Investment Plan involves regular investing in a preferred mutual fund scheme at specific intervals for a given duration. Under SIP investment, an investor pre-determines the investment amount, periodicity and the duration of the tenure. In order to make most of your mutual fund investments via SIP, consider the following SIP tips:

Mutual Funds SIP tips

1. To receive the maximum yield on your mutual fund investments, consider investing for a longer duration, say 10 years or more. This is because the power of compounding works best when exercised for a longer duration.

2. You must be familiarised with the popular adage – Don’t put all your eggs in one basket. This works for mutual funds as well. Putting all your hard-earned money in one mutual fund can be very risky. Instead, an investor should consider diversifying his/her investments across various asset classes. This way if one of your funds underperforms, it can be balanced by other funds.

3. One should regularly keep a check on their SIP investments to ensure that their funds are not underperforming for a long time. Though mutual fund experts frown upon the idea of discounting SIP investments, it’s important to exit the scheme if the fund has been underperforming for a while.

4. One of the best attributes of SIP investment is that they provide the flexibility to its users. An investor can change the investment amount, periodicity, or extend their duration of the scheme according to their convenience. One can also stop their SIPs if it is not working in their favour. SIPs usually don’t have any lock-in period. One of the exceptions over here is investments in ELSS funds. When you invest in ELSS funds via SIP, each SIP investment is locked for a period of 3 years.

SIP also provides their users with a tool known as mutual funds SIP calculator to calculate the SIP amount. A SIP calculator, also referred to as SIP return calculator helps to evaluate the future value of your mutual fund investments. You can also go backwards to calculate the required SIP amount by entering the future corpus value. Happy investing!

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