A Systematic Investment Plan, often known as a SIP, allows you to invest a little money on a monthly basis in your chosen mutual fund plan. When you set up a SIP, a specific sum is withdrawn from your bank account each month and invested in the mutual fund of your choice. In this article, we will discuss all that there is to know about the best SIPs to invest in.
· The best SIPs for investment allow you to invest small amounts regularly
· You can opt for monthly auto-payment
· You don’t need to worry about market fluctuations
· SIPs are a great way to plan your budget and expenses better
Is Finding the best SIP to invest in the Key to Achieve Financial Success? Understand the Basic
When you choose the best SIP to invest in, you acquire a particular number of fund units equal to the amount you invest. When investing through a SIP, you don’t need to time the markets because you gain from both upward and downward market movements.
When the markets are down, you buy more fund units, whereas when the markets are up, you buy less. Because the NAV of all mutual funds is changed daily, the cost of buying may differ from one SIP payment to the next. The cost of buying averages out over time and turns out to be on the cheap side. This is referred to as rupee cost averaging.
Did you Know?
KYC paperwork and a net banking account are required for all mutual fund investments. Undergoing KYC authentication is required by the Securities and Exchange Board of India (SEBI) in order to invest in mutual funds, and it is a one-time process.
Why Should You Invest Through SIP?
They are Convenient
The best SIP to invest in allows you to participate in equities funds without needing to time the market. When you invest in equity funds through the SIP, you invest a predetermined amount on a regular basis throughout stock market levels. It allows you to buy more equity fund units when the stock market is falling and fewer units when the market is rising. Over time, you will average out the purchase price of equity fund units, reducing the influence of short-term market changes on your investment.
Let’s look at an example of rupee cost averaging: Assume you make a monthly SIP investment of Rs 1000 in an equity fund. Stock markets are extremely volatile, and the Net Asset Value (NAV) of an equity fund fluctuates. This implies you won’t be able to invest at the same NAV each month.
Your SIP investment may look like this if you invest Rs 10,000 every month from January to June in a given year.
|Month||NAV||Number of Units(Rs 10000/ NAV)|
In the preceding example, the average purchase price for equity fund units was Rs 96 (576/6) for a 6-month period, and you acquired a total of 625 units. If you had invested a lump sum in January, your purchase price would have been greater at Rs 100 per unit, and you would have purchased 600 units (Rs 60,000/100). The rupee cost averaging enabled you in averaging out the purchasing price of units over time. This is why it is important to find the best SIP to invest in.
You Benefit from Compounding
The magic of compounding allows you to multiply your returns over time. It is essentially a return on your equities mutual fund returns. Assume you invest Rs 100 in an equities fund that yields a ten percent annual return. You do not make any profit from the equities funds since it is effectively reinvested in the mutual fund, and your total corpus is Rs 110. The returns you now receive from the equity fund are based on Rs 110 rather than Rs 100, which is the return on your returns. This is one of the biggest advantages of finding the best SIP to invest in.
You may take advantage of the power of compounding by investing in equities funds through the SIP. To get the benefits of compounding, begin your SIP as soon as feasible and commit to your investment for the long term.
Let’s look at an example to better comprehend the power of compounding. Assume four persons, Rohit, Krishna, Dinesh, and Karan, aged 30, 35, 40, and 45, have invested Rs 5,000 each month in stock funds via SIP. Assume equities funds have a 12-percentage-point yearly return.
The table below displays their accumulated corpus at the age of 60 when they retire.
|Monthly SIP (Rs)||Age (Years)||Time till Retirement (Years)||Investment Amount (Rs)||Final Corpus (Rs)|
Returns are Twice as High as in RD
The best SIPs to invest in have the potential to outperform bank FDs, PPFs, and other traditional investment alternatives.
Investing in stock funds via SIP is a handy approach to accumulating money over time. It is cost-effective since you may invest as little as Rs 500 for every SIP installment. SIP instructs your bank to deduct the required amount every month, and this sum is invested in an equity fund.
Businessmen or Professionals – Who is SIP For?
First-time mutual fund investors may want to consider starting their mutual fund journey with a SIP. This is perfect for people who have a steady source of income, such as a salary. By starting a SIP, you may direct a portion of your regular income into mutual fund investments. You will be required to set away money at regular periods, which will help you instill a sense of financial discipline in the long term.
Did You Know?
The fund house’s reputation is a crucial consideration when selecting a plan since it indicates how successfully they were able to handle market highs and lows without causing their investors to suffer the effects of swings. This is why it’s important to find a reputable house while finding the best SIPs to invest in.
Best SIP to Invest in Now
|Top SIP Funds||3Yr Return||5Yr Return|
|Mirae Asset Large Cap FundSmall Cap Funds||13.89%||13.73|
|Axis Bluechip FundMid Cap Funds||14.72%||15.36%|
|ICICI Prudential Bluechip FundMid Cap Funds||14.86||13.4|
|SBI Bluechip FundMultiCap Fund||14.36||11.91|
SBI Flexicap FundBalanced Funds
Word to Remember
KYC or Know Your Customer is the process of verifying the identity of the customer. This process has been brought in place to minimize fraudulent and money laundering activities.
Before You Go
A SIP is a recurring deposit of a specified amount of money into a mutual fund plan. In brief, a one-time investment option may be chosen if you have money to invest right now, and a SIP can be chosen if you foresee a regular input of money in the future. SIPs are recommended for first-time investors.
The most convenient way to invest in a mutual fund scheme is through a systematic investment plan, or SIP. You may stagger your investments over time with a SIP by investing a predetermined sum at regular periods. Your SIP can be set to run weekly, monthly, quarterly, or bi-annually, according to your preferences. SIPs are open-ended, which means you may start or stop them at any moment. If you don’t have enough money to invest, you can pause your SIP for a period. There are no fines for investors who cancel or suspend their SIP.
Before you start a SIP into any mutual fund scheme, you should make sure that the mutual fund scheme’s objectives and risk levels meet your risk tolerance and profile. You can start a SIP once you’ve determined that a certain mutual fund is a good fit for you. You must have a bank account that is linked to your investing account. To simplify the SIP investing procedure, you may use ECS or give your bank standing instructions to transfer a set amount from your account into the mutual fund scheme of your choosing on predetermined dates.
Once you have found the best SIP to invest in, it is never a good idea to quit your SIP until you have reached your financial objective. Market fluctuations should have no impact on your judgments. Remember that the longer you stay involved and the more you invest, the greater your return on investment. When you intend to discontinue a SIP, you must notify the fund house.
Log in to your mutual fund investment account with the fund house and fill out and submit the ‘stop SIP’ form. Alternatively, you can go to a fund house’s branch and fill out a SIP cancellation form.
A SIP account is a fund house arrangement that allows you to invest a little amount of money in a mutual fund plan of your choice at regular intervals. Having an active SIP account helps you develop financial discipline over time by requiring you to set away a specified sum at regular intervals.
The net asset value (NAV) of a mutual fund is the price at which investors can buy or sell units. Most mutual funds’ NAVs are updated on a daily basis after business hours. All mutual fund trades take place only at the current NAV. The current NAV will be your cost of purchase each time you invest through a SIP payment.