Systematic Investment Plan (SIP) is a popular investment option for many millennials nowadays. It is basically a way of investing in mutual funds where specific amounts of money are invested at fixed intervals (monthly, quarterly, or annually) over a period of time. The SIP calculator online has proved to be a boon for investors who can easily measure the expected returns based on the amount being invested, the desired period of the investment, and the expected rate of interest.
What are Mutual Funds?
Before we delve deeper into the SIP investment hacks, it is important to understand the concept of mutual funds. Mutual funds are essentially professionally managed funds where multiple investors pool their money together with a common objective of earning maximum returns. The pooled money is invested in stocks, bonds, or other market instruments depending on the fund type. The returns earned are shared among the investors as per their investment in the mutual fund. Mutual funds are an excellent way of investing money in stocks without having to deal with the nitty-gritty of the stock market.
Maximizing Returns on Your Hard-Earned Money: SIP Investment Hacks
Here are some SIP investment hacks that can help maximize returns on your hard-earned money:
1. Start Early: The golden rule of investing is to start early. The longer the investment period, the higher the potential return. For instance, if you start investing ₹5,000 per month in a mutual fund SIP at the age of 25 and continue until the age of 60, you can accumulate approximately ₹2.5 crores assuming an annual rate of return of 12% per year. If you were to start investing at the age of 35, you would accumulate approximately ₹90 lakhs under the same assumptions.
2. Invest Regularly: One of the biggest advantages of SIP is that it inculcates the habit of regular investing. Investing a fixed sum of money at regular intervals helps the investor achieve the twin goals of rupee-cost averaging and compounding. Rupee cost averaging means that you buy more units when the prices are low and fewer units when the prices are high, resulting in an average cost of acquisition. Compounding refers to the reinvestment of the returns earned into the same fund, resulting in higher future returns.
3. Have a Long-Term Investment Horizon: Investing in mutual funds through SIP can offer significant returns, but investors should have a long-term investment horizon. Equity mutual funds, typically, invest in a basket of stocks, which offers returns that are market-linked. Hence, investors should have patience and stay invested for a longer duration to earn the desired returns.
4. Diversify Your Portfolio: Diversification is key to a successful investment strategy. Investing in different types of schemes across different sectors and markets can help to mitigate the risk factor. The SIP calculator online aids in determining the percentage of allocation for different schemes.
5. Switch Fund: Investors should keep a watch on the performance of their mutual funds. If a fund is underperforming for a prolonged period, or if there is a change in the economic fundamentals of the sector, it is ideal to switch to a better-performing fund. The SIP calculator online can help in comparing and identifying the best mutual fund.
Investment in mutual funds through SIP has emerged as a popular investment option among investors. The SIP calculator online provides a comprehensive tool for investors to calculate and evaluate their returns and also helps in choosing the right mutual fund. Investors, however, should bear in mind that investing carries risks that could lead to loss of capital.
In conclusion, the SIP calculator online can be considered a catalyst in achieving your financial goals. It is important to choose the right mutual fund after careful evaluation and analysis of the fund’s performance with the help of a financial advisor or using an online SIP calculator. Investment to achieve your goals should always be planned in a diversified manner to mitigate the risk factors. Investors must also carry out independent research while investing in the financial market and assess the risks associated with financial products.