Best SIP Plan Strategies that Actually Work

From the period April to September in 2017, mutual funds pumped more than USD 12 billion in the equity market of India. This clearly suggests the staggering popularity of mutual funds in the country. Increasing number of investors now understand the benefits of investing in mutual funds, especially equity oriented funds which can deliver exponential returns on a long-term basis.

For investors who do not have a lump sum amount to invest, SIP (Systematic Investment Plan) is an excellent choice. With SIPs, you select a particular amount which will be debited from your bank account every month to buy units of your selected mutual fund. But just like any other investment, it is important to have the right strategy in place to make the most of your SIP investment.

We have created a list of some strategies for best SIP Plan to help you maximise your returns on the investment.

1. Select the SIP Amount Carefully

One of the first steps of starting a SIP is selecting the SIP amount. You can calculate the amount that you should invest in a mutual fund by understanding your financial objective. It can be as little as Rs. 1000-2000 for long-term goals like retirement, child’s marriage, or education, but higher for short-term goals like buying a home or car. It is by investing the right amount every month that you’d be able to effectively reach your objective.

2. Pick a Date that is Closer to the Beginning of the Month

You’ll be required to select a date in which the AMC would debit the SIP amount every month from your bank account. As most of us are salaried individuals, it is better to pick a date around the beginning of the month when we receive our salaries. If you select a date around the end of the month, there is a possibility that you might not be left with the adequate SIP amount.

3. Avoid bunching by staggering the SIPs

A lot of investors pick different funds for different objectives. For instance, a SIP of Rs. 5000 in an equity fund for long-term objective, another SIP of Rs. 2,000 in a debt fund for better short-term returns than traditional instruments, etc. If you do choose this path, make sure that you select different dates for the SIPs. This would maintain the liquidity in your account as all the SIPs would not be debited on the same day and would also minimise the risk of timing the market.

4. Know the Right Fund for You

Selecting the right mutual fund is also very important to make sure that you are actually able to reach your goal. There are many different types of funds like equity funds, debt funds, balanced funds, ELSS funds, and more. Understand what these funds are and then select the ones that best suit your objective.

5. Increase the SIP Every Year

With time, your income would rise too. Make sure that you also increase the SIP amount as your income rises to beat the inflation and generate higher returns. An increase of 5% to 10% would be the best to achieve your long, mid, and short-term financial goals. This is also known as a step-up approach and is known to offer great benefits on a long-term basis.

If you are about to start a SIP, these are some strategies that you should surely keep in mind. Before starting, understand what mutual funds are, their types, and how SIPs work to avoid making any expensive mistakes.

If you are planning for a long-term financial goal, a mutual fund Sip that suits your objectives and your surety of getting exceptional results can be an excellent option.