Importance of Mutual Funds SIP | Gupta Investments

Mutual funds are one of the most popular investing options available to both novice and seasoned investors. You can invest in mutual funds either through a systematic investment plan (SIP), which requires the investor to invest at regular periods, or through a lump sum (one-time) investment.

SIP or systematic investment plan is one of the best ways of investing in mutual funds. An SIP allows you to invest little amounts at regular periods, such as weekly or monthly and units are allotted for the amount invested in each instalment.

 

How SIP Works?

When you invest in a mutual fund scheme through a SIP, you buy a specific number of fund units equal to your investment amount. The biggest advantage of SIP is that one need not time the market. Rather than trying to time the market, investing every month will ensure that you are invested at both the high and low points of the market, allowing you to make the most of an opportunity that may be difficult to forecast in advance.

While opening a mutual fund account and investing via SIP is seamless and convenient given that online platforms today help even first-time investors complete the registration process within just a few minutes and in a completely paperless manner, it's important to know the factors you need to address before starting an SIP.

 

Benefits Of Investing In SIP

Condition choosing for mutual funds

Identify your goals

Identify the goal for which you want to start the SIP. Besides goal, also figure out how much time you have to attain that goal, in other words how much can your corpus grow and compound.

Assess your risk profile

Understanding your risk tolerance and the type of investor you are will help you choose the correct mutual fund schemes and asset classes to invest in. You may have a larger risk appetite as a youthful investor than those in their middle or near-retirement years. A balanced fund or a diversified large-cap equity fund is a good choice for risk-averse investors.

Expense costs

The fund's expense ratio, as well as the entry and exit loads levied at the time of redemption, are all key aspects to consider when choosing a scheme. Check the fund fact sheet, portfolio statement, and performance tracking websites.

The calculation is on the basis of your financial goals, time horizon and expected rate of return. It is essential to choose an appropriate transaction date and link your SIP investment with your bank account.


Conclusion

Reviewing your future goals and portfolio returns on a periodic basis is a great idea to maintain your financial well-being. As a result, make sure that your SIP investments are in a worthy mutual fund scheme.


Website: Gupta Investments

Blog: Mutual Funds Investment


Location: India

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