A journey begins with a destination in mind, similarly, a financial journey begins by setting a goal. The new financial year has started and all of us are thinking of starting saving or investing to avoid the accumulated pressure of saving at the end of the year. Earlier, most of the savings and investments were done without a particular financial goal in mind. But now, with the help of widespread and ease in information availability, we try to ensure that our investments bring in higher returns. With the rising Sensex, at the Stock Exchange, we all know that investment in Equity is the only way to achieve financial liberty. Most of us worry about market volatility and the limit of time to study the market. Due to which, we refrain from investing in Equities. We fear we will lose our savings, even for a temporary period on a speculative basis. However, we cannot ignore financial needs, when we care about our family and its requirements, whether current or future. The answer to achieving our financial goals come via taking a number of steps, regularly and relentlessly. The answer comes from regular investing or SIP. Read on to understand how to invest in SIP Mutual Funds and make market fluctuations your best friend.
SIP or Systematic Investment Plan is a manner to Mutual Funds Investments by paying a small amount of money periodically (quarterly, monthly, weekly). This makes investing less stressfree than collecting a Lump Sum capital and then investing. This mode has pulled the general public, who don’t understand much about impacts on the market, like you and me, towards Mutual Funds Investments.
When we understand how to invest in SIP, whether the market goes up or down, we will achieve our financial goal.
Let’s say “A” has invested a Lump Sum amount in Equities, it will not be much beneficial as “A” might have invested at a time when the market was high. So “A”, without expertise in the market, could buy a lesser number of units. Whereas, with SIP investment, units are bought at regular intervals. Which means that payment of SIP continues throughout the ups and downs in the market. Thereby, you buy more units when the market is low and fewer units when the market is up. Your investments would be the average of all these units, getting you a higher return. And that too without the need to study the market too thoroughly.
Besides, a large portion of your income will get locked in those units. The Funds may perform well for a while, but nothing is guaranteed in a fluctuating market. For example, a particular fund that you had invested a good part of your savings in, starts underperforming continuously for two to three years. Thereby resulting in your returns and capital eventually zeroed down. It may even become negative. If you have other financial liabilities like loans etc. to repay, which again we all have. Then such an investment would hinder the progress of your financial position.
By opting for SIP payment, you can avert such situations. With SIP you can frequently monitor the performance of the fund invested into. Once you feel that your investment has reached a significant level. That it will cover the approximate cost of future requirements. Ten you can dig further and try increasing the risk factor with your next plan.
How Much to Invest?
At least 50% of your savings should go into Equities, whether they are Large-Cap, Mid-Cap or Small-Cap. Or you can opt to invest in a combination of these 3 with Multi-Cap. And you must already know that investing in Best Equity Mutual Funds bring Returns over a longer period of time. So keep invested for at least 5-7 years. This will ensure that you receive good Returns. A balanced mutual fund portfolio always ensures that your Returns turns out to be more than your investments.
Investments in Capital invariably come with fluctuations and some risk. And, this affects your returns. But these irregularities get averaged over a period of time. Therefore keeping invested for a longer time is advised. If you keep moving in and out of Funds whenever the market is low, it will only increase your expenses. Besides, it will also reduce the overall Return that your Fund is expected to earn.
Your investment will experience both profit and loss. But the trick is to keep the investment going for as long as possible to make your money grow. In case you exit your funds or stop the SIP when the market is underperforming, you would not be able to achieve many Mutual Funds benefits. You wouldn’t know but you may miss out on those days when the market was performing well. That could have recovered your Returns.
How to Invest in SIP and Achieve Financial Goals?
By investing through SIP, you get to ensure that your hard-earned money is being invested in a well-diversified asset class and sectors. And that the risk involved is exactly what is acceptable to you. This “well-diversified” is an important phrase (and therefore, boldened). This makes sure that you receive the optimal Returns. The SIP plan is simple and flexible, so diversifying becomes easier. The money gets auto-debited from your bank account and gets invested in the best mutual fund scheme that you had selected. The amount is used to purchase the units of this Fund, depending on the market NAV (or Net Asset Value) of that Fund on that particular day.
We suggest that you base your search for Best Performers on below conditions:
The total asset size or Corpus should be large. Rs. 500 Crores is a good point to start with. Of course, there are Mutual Funds with less than 500 Crores but performed well. But since we are just beginning our journey, we can keep this amount as an essential criterion.
The Mutual Fund has been in duration for at least 5-years (It will be better if it has been there for a longer time, as we can check its performance more thoroughly).
Select a reputed Fund House/AMC for your first investment. There are several fund houses in India, to choose from. Some are UTI MF (UTI Mutual Funds), HDFCMF (HDFC Mutual Funds), SBI MF (SBI Mutual Funds), AB MF (Aditya Birla Mutual Funds), ICICI Prudential Fund, Reliance, etc. In case you recognize any of them, it is probably a good starting point.
Because the SIP amount would get auto-debited from your bank account, so it should be in alliance with that particular bank. Otherwise, you can contact the relationship manager of your bank and he will get you set up.
How to Invest in SIP that works?
As the name, “Systematic Investment Plan” suggests, SIP allows you to invest on a regular basis at a pre-fixed date.
For example, you get a salary of Rs. 50,000 per month. You want to take up a SIP plan of Mutual Funds, for Rs. 5,000 monthly. You need to search thoroughly (with the help of Google, of course) for the Best SIP Mutual Funds, in India. This way, you will know how various Funds in the market have been performing, how and in what criteria have they outperformed the market over a longer period of time. You have selected ICICI Prudential Banking and Financial Services Fund, for instance. From one of the largest Mutual Fund Houses in India. This was launched in August 2008. It has achieved a huge Fund Size of over Rs. 3,000 Crore since its inception of 10-years. When you start investing in this Plan through SIP, from 7th June 2019. An amount of Rs. 5,000 will get automatically debited from your bank account every month, on the 7th. On 7th itself, conditional to the market being open that day, the amount will get invested in the selected Fund in your name.
This way, SIP brings consistency and discipline in saving and thereby spending or budgeting. These are the 2 fundamental principles to build your wealth.
Another great advantage of SIP investment is the Power of Compounding. With your Rs. 5,000 being invested per month, your investment accumulated into a large capital, over the long duration. Under this system, the SIP amount you invest in the beginning earns interest. Now that interest + those initial SIPs get re-invested and so on, adding to your total investment, over the years.
Say you started investing in April 2013 and now is the start of May 2019. To sum it up, you have paid 72 SIP of Rs. 5,000, adding up to Rs. 3,60,000 (Rs. 5,000 x 72 SIP), the total amount that was paid by you. Out of this, Rs. 60,000 that was invested in the financial year of 2013-2014 got an interest rate of only 10% (only illustrating). But, for next year, the corpus is Rs. 66,000 (Rs. 60,000 + 10% interest). And the SIP you pay during the next financial year, 2014-15 will be added to this. This way the amount of Rs. 66,000 and Rs. 60,000 will earn interest in the FY 2014-15. Bringing the compounding effect.
And, as per experts, a good mutual fund always and consistently outperforms the market.
So what are you waiting for? Get started and invest.
The best way to take the benefits of SIP is to stop over analyzing and get started. Even if you are not an expert in timing the market, don’t worry. This is the key benefit of investing via SIP. You can also buy SIP in the Best Mutual Funds Scheme online with WealthBucket. No need to get into complicated calculations. The vast experience and market studies by our experts will help you achieve your financial goals quicker and safer. Do a little research on your own, weigh the available possibilities and start investing. Besides, don’t forget the Tax Benefits of investing in Mutual Funds.
Which Fund to Invest in?
If you are looking for the best SIP plans, review their performance during the past few years and choose the best one, as per your parameters. To make things easier for you, we have shortlisted five best SIP Plans in India. Go through them in the following table:
|S. No.||SIP Mutual Fund||3-Year Returns||5-Year Returns|
|1.||Aditya Birla SL Frontline Equity Fund (G)||21.74%||17.29%|
|2.||ICICI Prudential Banking and Financial Services Fund – Regular (G)||21.98%||19.78%|
|3.||SBI Blue Chip Fund – Regular (G)||22.74%||18.82%|
|4.||Mirae Asset India Opportunities Fund-Regular (G)||24.37%||18.88%|
|5.||HDFC Mid-Cap Opportunities Fund (G)||33.33%||24.77%|
The Annualized Returns have been calculated based on information as on 31 December 2018. Please visit WealthBucket for the latest data.
Let us discuss these schemes a bit more so you can make a more informed choice:
Aditya Birla Sun Life Frontline Equity Fund (G)
Aditya Birla Sun Life Frontline Equity Fund is an Open-Ended Growth Plan. For investors who are looking for Higher Returns and are ready to keep the investment going for a longer duration, this is a great option. It boasts of a well-diversified portfolio, spread across industries and sectors. Complete 100% Capital from this Fund gets invested in Equity and Equity-Linked Instruments, as per its chosen benchmark index, BSE 200.
ICICI Prudential Banking and Financial Services Fund – Regular (G)
This Fund is an Open-Ended Equity Scheme that aims to generate long-term capital appreciation to the investors. The Portfolio contains significant investments in Equity and Equity Related Securities of companies that are engaged in Banking and Financial Services. Out of this, the Largest portion goes to Large-Cap Stocks, the rest is equally divided between Mid-Cap and Small-Cap. The Risk profile is higher, with Higher Returns and Long Term Wealth Creation.
SBI Blue Chip Fund-Reg (G)
SBI Blue Chip fund – Regular (Growth) is an Open-Ended Growth scheme. This Fund is the best for investors who have set a long-term objective to achieve. The Fund invests in a diverse collection of Equity stocks of different companies who have a market capitalization of more than the least market capitalized stock of BSE 100 index. The Fund invests majorly into Large-Cap. Being an Equity-Linked Fund, the associated Risk is quite high, as well.
Mirae Asset India Opportunities Fund – Regular (G)
This Fund got ranked 2nd in the Category of Diversified Equity by Crisil for 4th Quarter of the FY 2017-18 and the rank has remained unchanged ever since. Best suited for those investors looking for long term wealth creation, by investing in Equity and Equity Related Securities.
HDFC Mid-Cap Opportunities Fund (G)
The Corpus is invested predominantly in Mid-Cap Stocks. It has outperformed its benchmark and the category average across longer timeframes. HDFC Mid-Cap Opportunities Fund holds a well-diversified Equity Portfolio. The Fund manager follows a bottom-up approach for selecting the stock to invest in. Such stocks are bought primarily for the strengths of the company’s fundamentals rather than according to the macro-economic indicators. and prefers to stay invested in each of its holdings with a long term view.
The above Mutual Funds Plans are considered the best SIPs in India because of their very high ROI in the past few years. So, if you are looking to create wealth, investing in a SIP would be the best bet for you.
A Step by Step Guide to Invest in SIP
Step 1: Understanding the Risk Appetite and the Investment Objective
The first point to weigh is understanding your Risk Tolerance before selecting. Generally, Risk Tolerance is inversely proportional to the Age of the investor. In other words, older persons, with higher financial obligations have a Lower Risk Tolerance. In case you are just starting to invest, having recently started earning, you would have a Higher Risk Appetite. Coupled with whether you want a Higher ROI (return on investment), you will have to increase your risk tolerance.
Once the Risk Tolerance has been assessed, it is now important to understand the goal you are investing to fulfill. We invest to achieve our future financial goals. There may be multiple goals, e.g. Child’s Education, marriage, Property, Vacation, Retirement, etc. It is important to know the objective of investment, have an estimate of the future spending towards that goal. This way it will be easier to calculate the amount of SIP, the duration, etc. Try using a SIP Calculator before the decision, to know how to invest in SIP. You can also check the Mutual Funds Calculator to know the different Returns you will get from SIP & Lump Sum investment. This will help you diversify into the right Portfolio of Equities and Debt Funds.
Step 2: Which SIP to Choose for Your Investment?
If you are still unsure about which and how to invest in SIP Plan, you can search for various Mutual Fund investments available in the market. This selection of MF should be based on your Risk Tolerance and your personal Financial Objectives, that you want to achieve through these SIP investments. The performance of that Fund during the past few years must also be taken into account while choosing the funds. Once you have decided upon the Mutual Fund company, you, now, need to go through the following steps:
- Fill up the SIP Application Form,
- Submit a cheque of monthly SIP amount (if you are selecting Offline Mode to pay the SIP) or fill-up the ECS form (for payment of SIP through Online Mode),
- Canceled Cheque,
- ID Proof,
- Residential proof,
- KYC Form.
Step 3: Decide the Date of SIP Payment
In case you have chosen the Online Mode for payment of SIP, your money will get auto-debited from your bank account. So you are to choose a particular date when it is convenient for you to pay. You can also choose multiple dates per month for SIP Instalment. Most Mutual Fund companies offer the following dates for the investors to choose from: 1st, 5th, 10th, and so on.
Step 4: How Long to stay Invested in SIP?
Once you have understood How to Invest in SIP, you need to calculate the SIP amount required for meeting your future financial goals. This would require 1 or 2 inputs from you. Check different options in SIP, LumpSum, Duration and Interest rates using our SIP Calculator, Lump Sum Calculator, and Reverse SIP Calculator. This way you would be able to make a better and informed choice.
Step 5: Decide How to Pay for SIP
To make your SIP Payments, you can choose from both offline and online modes. However, as SIP allows an auto-debit of money, from your bank account directly into your funds, therefore, it saves your time, effort and money also. You do not need to personally visit the Fund House to make the payment, by opting for the online payment mode.
Step 5: Keep the Investment until the End of Investment Period
SIPs are the best way of wealth creation through regular and long-term investments. You don’t need to be on the look-out for daily prices of Mutual funds. No need to time and analyze the market every day. No requirement for understanding the impact of various factors affecting the market. So, stay invested until the end of your investment period, and stay tension free.
The Process to Invest in SIP
How to invest in SIP online in three simple steps:
- KYC Documents: To start a SIP, you do not need a handful of documents. You only need your PAN card, an Address Proof, a Chequebook, and a Passport size Photograph. For the address Proof, you can provide a copy of your Adhaar Card, Utility Bill, etc. Download and Fill in the KYC-form-For-Individual. Now that you have the KYC Documents ready with you, you can process your SIP account online. You need to get your KYC done only to start your journey of Mutual Funds. For all further investments, no KYC is required. To get your eKYC done, you can log onto the online portal of CAMSonline or Karvy. Or you can check our website and provide the necessary details, such as a soft copy of your PAN Card and Address Proof.
- SIP Application Form: You need to fill in an Application Form to invest Mutual Funds via SIP. In this, you need to provide certain details, such as your Name, Date of Birth, Address, and Mobile Number, etc.
- Starting SIP Online: Once your KYC is successfully done, visit the website of the Fund House and look for “Invest Now” Button. Fill in the basic details as prompted to create your Username and Password for online transactions.
There are a number of benefits of investing through SIP. So, if you are still not sure about how to invest in SIP and achieve your Long-Term goals, stop thinking and Call + 91 8750005655 NOW!! Or mail your queries at email@example.com.
Reach for the guidance of experts with a long-standing in the Equity Market, for investing in any of the variety of services on offer such as Debt Mutual fund, Large Cap Mutual fund or Multi-Cap Mutual fund, with WealthBucket.
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