How to choose the right SIP scheme?
Managing our own finances is definitely a task that is easier said than done.
For those who nodded in affirmation, here’s a whiff of relief.
Systematic Investment Plan
Better known as SIP, this investment plan allows people to invest with flexibility and continuity.
By accommodating almost negligible restrictions in terms of amount, time and type of investment, SIP poses as one of the most preferred options for those who are unsure of their finances in terms of investments and want to make the best out of their available funds.
And because the plan allows for such flexibilities, it also makes it imperative for potential investors to make their choices according to their desired returns from the plan.
A Few Things to Keep in Mind While Investing in SIPs
In order to know how to choose the right SIP scheme, and also for the ease of making a decision, you may wish to include the results of the following in your observations:
- Current Financial Status:
SIP is an investment, so you need to ascertain the amount that you want to invest. Once you have decided upon a figure, SIP will allow you the flexibility of payments. Based on your individual cash inflow, you may choose the period of your cash outflow, be it weekly, monthly or quarterly.
- Type of Investment:
Since a SIP works as a mutual fund, it is imperative for the investor to know the type of funds his/her investment will earn from. Mutual funds can be debt or equity, a short-term or a long-term plan; it is for the investor to choose based on his/her own needs or financial objectives.
If you wish to invest in best mutual funds, then you may wish to avail the diverse benefits that one can reap by investing in mutual funds through SIPs.
Here’s how and why:
- Minimal Risk Involved:
As compared to alternate modes of investments, SIPs offers negligible scope of risk that characterizes mutual funds and the financial market.
By assuring investors with multiple options, SIP allows the platform for thoughtful progress when it comes to managing your finances.
While the investors who are certain about their finances may opt for long-term or equity funds, the others with plans spanning lesser time intervals may opt for liquid funds.
The investors are therefore aware of the intensity of the risk attached to their specific SIP, and hence better equipped at minimizing it.
- Flexibility of Time
Owing to the continual changes in the field of mutual funds, many people fear that an investment may not fare as planned. SIP tries to encourage people to fight that fear, either by will or design.
While initial planners get ample exposure to mutual funds through various types of short-term investment plans, the experienced investors get to choose from some of the most favorable long-term schemes.
Also, by allowing the choice to pick your own intervals of payment, SIP encourages you to ascertain your spending pattern in a more effective manner.
- Maintains Continuity of Payment and Returns:
Since SIP is an investment, all methods of payments pertaining to it ensure that the risk is minimized not just for the investor but also for the institutions that operate and utilize the funds for optimal returns.
ECS, Direct Debit or Post-dated cheques are the payment methods that are mostly used by investors who invest in mutual funds through SIPs in India. These methods prove to be beneficial for those who happen to have a fluctuating financial plan, as these methods ensure negligible scope of a possible delinquency.
Also, a SIP can be discontinued at any time, thereby indicating the marginalized degree of impositions that an investment can sometimes lead to.