What should be your best bet for investment in SIP Mutual Funds?

Mutual Fund Sahi Hai. . . almost all of us have heard and read it on banners, advertisements and of course.. mutual fund advisors. And no doubt, popularity of SIP Mutual Funds have grown, not only in big cities but also in semi-urban cities.

As per data compiled by Association of Mutual Funds of India, Assets managed by the Indian mutual fund industry have grown from Rs. 20.97 trillion in August 2017 to Rs. 24.70 trillion in August 2018. That represents a whopping 17.81% growth in assets over August 2017.

Thanks to advertising and efforts put in not only by the government bodies but also private banks, there has been increase in awareness about investment and SIP mutual funds. People are now switching to this investment option from traditional options like real estate, fixed deposits and gold.

Even those who were erstwhile horrified by share market, are betting on equity mutual funds for long term.

Since it has emerged as the wonderful investment option, it is important that you should know, what schemes you should select as per your risk appetite. This article will let you know the intricacies of investing – how? Why? When? What?

The W’s of Investing in SIP Mutual Funds

The first W- WHAT?

SIP Mutual funds need no introduction. They are the most simple products available in the market for investment- for both long and short term. Through mutual funds, you can easily invest in both debt and equity. Further, you can apply for redemption anytime, and the units will be redeemed. Apart from these benefits, SIP Mutual Funds offer facilities, like SIP Pause- you can pause your SIP anytime and restart it anytime, Systematic Transfer Plan – you can transfer the amount from a debt scheme to equity scheme of the same fund house, Systematic Withdrawal Plan- You can withdraw fixed amount every month from your investments.

 For more information, you can read Understanding the Fundamental Of Systematic Investment Plan and What is Systematic Investment Plan?

The second W- WHY?

Investing in SIP Mutual Funds is less risky than investing in the share market and you can generate higher returns than fixed deposits, gold or even PPF. If you look at the data since the financial year 1987-88 till the financial year 2017-18, there has been a 14.43% growth. However, fixed deposits reported a growth of mere 8.68% growth. On similar lines, PPF grew by 9.81%, Gold by 8.66% and silver by 7.38%.

So basically, if you invested, in the year 1987, a sum of Rs. 2 lakh in the equity market, you would have earned over Rs. 1.30 crores. However, if you invested in any other investment option, you would have generated at most Rs. 36 lakhs.

To know more about why should you invest in SIP Mutual Funds, read Why on should do SIP Investment?

The third W- When?

Now, this is a tricky one. You should invest as soon as you find it convenient to do so. Few of us start investing as soon as we get our first salary in hand, while few of us, probably never start investing because of procrastination. Hence, it all depends upon you when you actually start investing.

However, do remember that sooner you start investing, the better it is.

If you are planning to invest in a SIP, then make sure you have the patience to wait at least 5 years or so. Equity mutual funds do give very good returns in the long run – provided you stay invested and adopt a disciplined approach towards your SIP.

You can also plan out how to start investing by keeping your goals in mind. For example, say you have 20 years to retire. So to accumulate retirement corpus or funds for your entire retirement, you have to start investing. And you have only 20 years to do so. You’ll have to start a lower SIP if you start now, and get to reap the benefits of compounding. The late you start more will be your sip amount, or less will be the return.

For more details, read Is it the right time to start investing?’

The fourth W- Who?

Interesting question indeed! Who should invest your money is indeed a deciding factor weather, you’ll be able to accomplish your goals, or whether you’ll be able to generate enough returns. Hence, it is any day advised that one should consult a financial advisor, especially Certified Financial Advisor for any decision related to investments.

If you know the technical know-how of debt and equity, you can invest directly in SIP Mutual Funds.

For more information, read How to invest the right way?

Do your Homework before investing in SIP Mutual Funds.

Whatever method you are opting for investment- online or not, director regular, you should do proper research at least on the basics of investment.

Further, you should know the aim of your investment. Set your goal before planning for investment. This way you’ll know how much you’ll require and hence how much investment you should make.

After you have zeroed down to your goals, next comes how much fund your goal requires? Further, you should also prioritize your goals.

Hence, after giving a thought to all the above points, decide with the help of an advisor- how much amount should be invested- in a lump sum or through SIP.

What funds to choose from a lot?

The kind of funds you choose or as advised by your certified financial planner depends on your risk taking capability. Further, it also depends upon the timeline of your goals. If you are among those who cannot bear any amount of risks, go for debt funds. Those with slightly higher risk bearing capability can go for hybrid and equity funds. However, remember that there are subcategories as well.

Consult a financial advisor for any kind of investment related advice. They not only review your plans continuously, but also provide detailed insights and a long-term plan for the accomplishment of your goals.