SIP has become a household name in today’s era and almost every wise investor maintains a financial portfolio with a certain percentage devoted to mutual fund SIPs. One of the major reasons for this popularity is that you never need a huge corpus, to begin with, this investment. A minimal amount of just INR 100 is enough to begin your journey. You can easily use an online mutual fund calculator or SIP calculator to know your prospects.
SIP is a typical method of MF investment where you need to invest a fixed amount of money in the market at fixed regular intervals to your preferred MF scheme. As this investment strategy spans some time, it inculcates a disciplined financial management approach, creating a considerable corpus in the long run.
Benefits of SIP investment
Some of the most important benefits of SIP investment include:
- Rupee cost averaging:
Since a SIP spans for a considerable amount of time, it passes through variable market phases. It enables you to buy more units during the low market and vice versa, thus averaging out the per-unit cost throughout the investment horizon.
- Disciplined investment:
Since SIP requires regular involvement, it makes you invest before you decide to spend your earnings. It inculcates a disciplined investment approach, perfectly suitable for achieving long-term financial goals.
- Power of compounding:
This implies that the interest earned from your investments is reinvested in the same fund, thus enhancing the scope of returns. The earlier you begin, the better prospects of earning you create, especially in the long run.
SIP working strategy to make you rich
For substantial gains, long-term equity fund investment is considered ideal. It encourages small deposits for a considerable tenure regularly, irrespective of the market conditions. The amount of your investment decides how much corpus you can build over a span of 10 years. Certainly, if you keep investing INR 500 INR, the capital growth won’t be the same as an investment of INR 5000/month. You can easily utilise the online SIP calculator or mutual fund calculator to know the results. It revolves around making the investment work best for you:
- You can begin with a lump-sum investment and top up with a SIP, assuming that you possess the corpus
- Increase your risk appetite for enjoying higher returns. Large-cap funds are comparatively safe zones for long-term strategies, while sector funds or small-cap funds are much riskier with prospects of higher returns
- Try to increase your investment amount regularly by squeezing more from your earnings for creating better prospects for higher returns
Through regular SIP of 10 years, you can even reach hit the INR 1 cr. mark. Considering the approximate annual CAGR is 15%, you need to invest INR 36335/month to hit the milestone within 10 years.
However, this is just an example. It may not be possible for every individual to invest that much per month for SIP.
Ways for making your SIPs most rewarding
- Equity fund investments are comparatively more rewarding than debt funds
- Once started, never stop a SIP in between as it grossly affects the compounding power
- Ensure maintain a comfortable timeline for investment
- SIP investment must always be focused on Flexi-cap funds or diversified funds
- In case of any difficulty in monitoring the regular investment SIP amount, try for a step-up SIP depending on the circumstances
- Always try to opt for growth plans, which offer auto compounding, rather than dividend plans
- As the target approaches, redeem the SIP with a smart execution strategy
- Always tag every SIP to a goal to make it more purposeful
- Regularly review the status of SIPs
- Ensure that most SIPs are related to long-term goals.
What will be the net asset after investing INR 10000 for 10 years in SIP?
The performance of any mutual fund investment is dependent on several factors including market performance, the performance of the concerned scheme, and the decision and discretion of the fund manager. Before investing, you must remember that in the MF market, there is nothing called guaranteed returns.
Using the lump-sum calculator, we will site an example of the results of a 10-year-long SIP investment of INR 10000/month, with an expected rate of return @12%,
In equity funds, the estimated returns amount to INR 21058, when the total investment amount is INR 31058
In hybrid funds, the expected rate of return being 8%, the estimated returns amount to INR 11589, when the total investment amount is INR 21589
In debt funds, the expected rate of return is 6%, and the estimated return value is INR 7908 with a total investment of INR 17908.
Conclusion
In the case of mutual fund investments, there is no single solution for every investor. Any investor must carefully assess and analyse the requirements, the goal, and the market conditions along with the relevant details of the concerned fund manager before investing. Even before you invest, you can enter your estimated facts and figures on the online mutual fund calculator or SIP calculator to make better planning and assessment.
