Investing in mutual funds has become very famous across the globe. People are inclined towards SIP as a tool of investing. Somehow, things are getting more and more expensive day by day making it difficult to save money. If a person cannot save then how will he be able to fulfil his future goals? To accomplish future goals, it is important to save. The next thing that is important is to decide where to and how to invest. It is good to have priorities.
The investment in the mutual fund should be done through SIP as it gives you a chance to choose from various plans. You even have the flexibility to select the payment options (money deduction from the account or manual payment) and the installment duration (weekly, monthly or quarterly). The money you will get at the end will depend on two things; the time duration of the SIP and the current market value.
According to the financial experts, a person should invest 50% of his income into equities. For that, a person should remain patient. You should always be ready to face risks as capital market investments are associated with volatility. People are also confused about the magnitude of investment. This amount usually depends on the goals. It could be buying a house, a car, planning for a world tour or for securing your retirement.
Have you ever calculated that how much you need to invest through SIP? It is according to the financial goals, and it is important to follow some steps for that.
STEP 1: CALCULATE THE MONEY YOU NEED TO ACHIEVE YOUR GOAL.
It is important to know the exact sum of money needed to meet your future goal. You need a fool-proof plan to make an imaginary thing real. For example, you need Rs.30 lakhs for a world tour. Ensure that you have already calculated whether or not your SIP will give you that amount at maturity. Also, check whether you will be able to pay the installments or not.
STEP 2: DECIDE WHETHER YOU HAVE ENOUGH TIME OR NOT.
The goal towards which you are saving should be at least 5 years away. SIP investments need time to grow and it will not be able to meet your immediate income requirements.
STEP 3: ADJUST THE GOAL AMOUNT FOR INFLATION AND PRICE RISES.
The price never remains the same. The cost of living is increasing at a high rate so how can you think that your cup of tea will cost the same after a few years? Keep this point in mind whenever you are investing your money in a mutual fund. The SIP calculating sites provide you with an option of calculating it.
STEP 4: WHAT PERCENTAGE OF RETURN DO YOU EXPECT?
Don’t make any assumption about the numbers. The rate of return changes according to the stock market indices. The market can give you a 12% to 30% return approximately (Return depends on several factors).
These steps can help you to achieve your future goals. There is a myth that SIP is meant for small investors and the people can only invest a small amount in it. But it’s not true. Any investor who has the habit of regular investment can go for SIP. It gives a chance to small investors to start investing from an amount as low as Rs.500 per month. But there is no limit for the maximum investment amount in SIP. An investor can also invest lakhs of rupees per month.
We can conclude that both big and small SIP’s are almost the same. It totally depends on the investor’s goals. SIP can be a good way to invest your money in mutual funds and earn monumental rewards from it.