What is the right amount to invest in SIP?
The best part of a SIP is that you get to decide how much to invest in SIP.
The best decision is taken after consulting an expert on financial planning and also by taking care of some initial considerations.
In order to decide how much to invest in SIP and what exactly would be the right amount of investment that will cater best to your needs and preferences, you may wish to take a quick look at some of these areas.
Key Points to Consider on How Much To Invest in an SIP
- Amount to Invest:
The right amount to invest in SIP would be the amount that you are perfectly comfortable to invest in the first place. If you are unsure of this amount, you may still proceed with a SIP, either with an experimental/ lesser amount of investment, or a plan with a lesser duration of time.On the contrary, if you are absolutely certain about your financial inflows and outflows, a long-term and large scale investment plan may offer you the best returns.
- Frequency of Investment:
Deciding on how to choose the frequency of investment for a SIP is best accompanied with a thorough examination of your previous spending patterns and the thoughtful consideration of your upcoming ones.To put it simply, if you wish to bring a drastic change to your financial status within a decided period of time, it is advisable for you to not indulge in SIPs that come with a tenure that may exceed that timeframe.
- Tenure for your SIPs
How much to invest in SIP is a factor that is largely affected by the tenure of the SIP. For example, if you have a substantial amount of capital and you are looking for some substantial gains on it, then it would be feasible for you to pick a plan with a longer tenure.Since you are investing your capital for a longer duration, your respective financial institution is more likely to honor the commitment in the guise of higher returns. It is imperative for interested investors to choose their tenure according to their desired outcome from the plan and their individual financial capacity to abide by the tenure.
DIY Methods to Decide How Much to Invest in SIP
While nothing can overrule the importance of a direct/personal consultation when it comes to choosing the right amount to invest in SIP, interested investors may also like to avail some of the DIY tools that are now available on a majority of websites pertaining to global and national banks and other financial institutions.
One such effective tool is the SIP Calculator that is easily accessible on the web.
A typical SIP Calculator helps you to decide the right amount to invest in SIP by analyzing some core areas like
- Investment Amount
- Frequency of Investment and
- Tenure of Investment.
For example, as per one of the schemes available in the market today, a person willing to invest 10,000 INR on a SIP for the tenure of 2 years may get returns of up to 49.61%.
The amount of returns may differ as per the norms of the individual schemes, but the calculations are intended to make the investor aware of the possibilities of the investment in terms of Investment Value of the Plan, which is depicted by the Compound Annualized Growth Rate, or CAGR, on the SIP returns.
The calculation of SIP returns is indispensable for the investor if he/she chooses to decide on what would be the right amount to invest in SIP for maximum returns.