If If you do not want to take the risk of investing directly into the stock market, then mutual funds can be a good option for you. Here your risk decreases to some extent. If you are not able to invest out lump sum, then you can invest in mutual funds through Systematic Investment Plan (SIP). You can invest a small amount every month in SIP. Today we are going to tell you 5 such things, taking care of which you can earn good returns from mutual funds through SIP.
1. Do not delay investment
One of the biggest advantages of SIP is power of compounding (compound interest). The sooner you start investing, the bigger the funds will be made. With this, you can also accumulate big capital with small investment. Starting late means not being able to take full advantage of compounding.
2. Choose the right fund
Not all mutual funds are the same. You should do research on various funds based on the previous performance, expense ratio (cost of running funds) and the expertise of the fund manager. Choose funds that match your risk -taking ability and investment goals, whether they are equity (shares), debt (loan) or hybrid (mixture of both).
3. Review your portfolio
Do not make the habit of ‘forgetting’ by investing. It is very important to review your SIP portfolio regularly. This will help you make changes in your portfolio according to the need. Keep an eye on funds that are consistently performing better than their benchmark (prescribed index for comparison). If your current investment is performing poorly, consider taking out the funds and investing in a better option.
4. Stay disciplined
Market fluctuations may be disturbing, but the key to success in SIP is to be disciplined. By continuing your investment even during the market decline, you can buy more units at low prices, which overcomes your purchase cost over time (it is also called the rupee cost average – Rupee Cost Averagging). Do not stop investment in panic.
5. Gradually increase the amount of SIP (Step-up SIP)
As your income increases, consider increasing your SIP amount. This step-up approach can help you take advantage of the full capacity of mutual funds. Also, it ensures that your investment maintains synergy with inflation and your growing financial goals.
(Disclaimer: This article is written only for the purpose of information. Please consult your financial advisor before any type of investment or before taking financial risks. India TV will not be responsible for any kind of risk.)
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