A SIP or Systematic Investment Plan is an option for investing in a chosen mutual fund for a certain period of time, with customised amounts, without having to disrupt your monthly budget. In the current scenario, with the growing popularity of SIP mutual fund, most investors are aware of the concept and its credibility to grow wealth, with time. It is an effective and time tested method to grow your savings into a larger corpus, with the help of right financial advice, choice of funds, financial discipline and a fairly long period of time.
The idea of SIP is to break your big financial goals, into smaller and achievable ones, in order to inch towards them slowly. Suppose, your plan is to save up for abroad education of your child in the next 5 years. Then, it would make sense to start investing in a SIP mutual fund from today, in order to reach the aforesaid goal.
Since we will be dealing with the basics of the concept of SIP in this read, let us look at the simple steps needs to invest in SIP:
- Financial goal – First and foremost, the investor needs to figure out the financial goal he/she aims to complete with this SIP investment. It can be short term goals such as buying a car, luxury items or long term ones such as retirement planning or child education. Whatever it may be, this is the initial step that will give clarity to the entire investment process.
- Time period – Based on what the goal is whether it’s short or long term, the time period of SIP investment can be decided on. If it is a goal such as buying a car, then investing for 2-3 years would be sufficient. On the other hand, if the goal is funding child education, then investment over 5 years or more would be better.
- Investment amount – This is a crucial factor that an investor needs to decide to invest in SIP. One needs to know the amount needed to be invested monthly for reaching their desired financial goals. In this case, tools such as SIP calculator, available online, helps calculate SIP returns.
- Investment frequency – Once all the above factors are decided on, the investor can take a call on what frequency suits them for the SIP amount to be debited. This depends mainly on the income stream of the person. For a salaried person, a monthly SIP investment would be ideal, whereas for a freelancer or businessman, it might be daily or quarterly.
- Selection of mutual fund scheme – Once the investor is aware of the financial goal, time period and frequency, it is time to choose the mutual fund schemes for investment purposes. If it is a long term investment – say 5 years or more – investing in an equity mutual fund would be ideal.
SIP mutual fund is all about customized investing, designed to help retail investors reach their future financial goals. One should invest in SIP for making their portfolio stronger and secure their future. But before starting your SIP mutual fund, you must plan your goals using the SIP calculator. A SIP return calculator can tell you exactly how much to invest at certain frequency to reach your financial goals.
In this read, we focused mainly on the steps to invest in SIP. One should meticulously follow these steps for achieving success in the process of SIP investing.