SIP or Systematic Investment Plans are today one of the most lucrative investment option for somebody who is looking to invest in the market both on a short term and on a long term basis. With SIPs it is entirely up to you to decide whether you wish to make monthly, quarterly or yearly payments. Many a times you can also change the payment duration and amount. This is precisely why the SIP investment plans are the ideal tool for setting aside money regularly, including small sums. The first step towards investing in SIPs is to determine your investment goals and for the same it is essential to know your investor profile and your investment horizon. Investing in SIPs is in some ways identical and in some other ways different than investing the traditional way. With SIPs you have the possibility to constitute your assets systematically and to take part in the progressions of the stock markets especially in a growing economy like India. If you’re just a beginner and want to know how to invest in SIPs, this can be of great help.
Choosing a SIP
There are different types of SIPs offered by various players in the market. One thing a potential investor can do is to check up upon the past performance of the said SIP. Although past performance may not be a completely reliable indicator of future trends but it can surely give some insights. Along with the past performance there are also many independent analysts that can give valuable information on things such as performance, asset diversification and much more. Deciding on your financial goals and narrowing on SIPs that are available in the market, you can then ascertain what kind of investment plan will be suitable for you. Your investment strategy will also depend upon your risk taking capacity. Of course higher risk means higher returns, so which SIP you finally decide to invest in will also be determined according to your current living situation, your income, your wealth and also factors such as your personality and character.
Things to consider before investing in SIP
Another important factor to decide upon is how much you are planning to contribute and for how long you plan to stay invested? Please note that with SIPs the longer you stay invested and the more often you invest the better will be wealth creations and hence returns. The first question that crosses a potential investor’s mind is ‘how much to contribute? Well there is no definite answer to this question and it will differ from person to person but we all know that making small but regular contributions will compensate for ups and downs of the market. The second question is mostly ‘what is the right time to invest?’ Does entering the market at the right time makes the returns much different? If you plan to invest in SIPs for an extended period of time then the highs and lows of the market mostly averages out.
Why and how to invest in SIPs?
Just as with your overall investment portfolio, the idea with SIPs is also to create a systematic investment plan adapted to an individual’s needs. With SIPs, it is important to choose a product that is well diversified and from the stables of an established and reputed player. To be more successful and more efficient in your investments, something very important that you have to consider is to invest long term money that you will not need in the short term. Thus, with SIPs we can think about growing our savings to buy a house in a future, to cover any future expenses such as children’s education and more. With the correct SIP the bulk of the hard work will be done by professional fund managers. On your part firstly you need to do your research, also when investing, something very important that you have to be clear in addition to our investor profile is the investment strategy that you are becoming part of.