5 tips for investing in SIPs

Deploying investments in SIPs? You should always be careful about investments, particularly when there are market risks to be considered. Knowing more about SIP India plans is also recommended in this regard. The full form of SIP is systematic investment plan. It enables investors to regularly invest a fixed amount in mutual fund schemes, mostly equity mutual fund schemes. There are many reasons for investing in SIPs, namely the integration of more financial discipline in life, making investments regularly without attempting to predict or time the market.

SIP Funds are useful for automatically investing money regularly without any effort. They also help in averaging the cost of unit purchase while maximizing overall returns simultaneously. When you regularly invest over a certain duration, irrespective of market circumstances, you will get a higher number of units whenever the market is low and lesser units when the market goes high. This averages out purchase costs for mutual fund units.

Key tips for SIP investments

SIPs require patience, understanding and discipline on your part. You should have a clearly defined SIP India strategy in place for your investments. Here are the tips to be followed while choosing a systematic investment plan.

Start small and commence early- Starting the investment journey means that you can have more time devoted for growth and savings alike. The regularity of SIP investments and an early beginning means that you will generate sizable returns on investments. You will naturally earn more if you invest for the long haul and you will benefit from the power of compounding.

Enhance investments regularly- This should be done since returns are directly tied to investments. The higher your investment, the higher your returns and vice versa. This is even more apparent in case of SIPs where returns also keep earning more returns owing to the power of compounding. Choose a suitable SIP where you can invest more periodically throughout a sustained duration.

Set goals for the long term- SIPs are best positioned for meeting long-term goals and objectives. This is because the generated returns will keep accumulating till maturity and ensure that you have ample funds for achieving your objectives likewise. Always have a long-term horizon in your mind instead of investing for a shorter tenure for achieving your chosen objectives/goals.

Do not withdraw early on- Financial constraints may come up anytime and for meeting these sudden circumstances, you can choose to stop and withdraw the SIP investment as well. Knowing that the markets are unpredictable, if you exit at a low point in the market, the portfolio value will be lower. Systematic withdrawal will be a great option for supplementing income although you should not use this early in the investment plan. Rather, choose this when you are touching financial goals and the age of retirement. Once you choose systematic withdrawal, make sure that you only withdraw the returns component of your investment while keeping the principal component untouched.

Keep reviewing fund performance- The primary goal of every investor is earning the highest possible returns. Hence, it is important that you keep a tab on how your fund is doing. You may withdraw your amount from a poorly performing fund and reinvest in another better option. Yet, do this after reviewing returns over a few years.