Many individuals would like to start their investments when they have a large sum to invest. They believe investing a small sum regularly will not help them to meet their ambitious long-term goals. That is why many of them defer their investments indefinitely. They simply tend to ignore what power of compounding can do their small but regular investments. Many a times when i tell them that their small investments can make them crorepathi they will listen to me in complete disbelief.
Investing via monthly SIPÂ
Investing in an equity mutual fund scheme via an SIP is the best way to achieve your long-term goals. Equity has the potential to offer superior returns than other asset classes. It may also help you to beat inflation which is essential to achieve long-term goals.
However, you should not forget by just starting a SIP, this is not an ideal way to invest. You should try to increase your investments in tandem with your income, for this you can use an option called SIP Top-up.
Increasing SIP amount every yearÂ
Let us assume that you may be able to increase your SIP allocation by 10 per cent every year. So, in the first year you will have an SIP of Rs 5,000 per month, in the second year it will be Rs 5,500 (Rs 5,000+10 per cent of Rs 5,000), in the third year it will be Rs 6,050 (Rs 5,500 + 10 per cent of Rs 5,500) and so on.
There are couple of more SIP formats apart from these two, like Flexi SIP, Value SIP etc.,
Keep track of your investments
It is important to track the performance of your mutual fund schemes regularly. Review their performance every year. If the schemes are beating the benchmark comfortably and not lagging their peers significantly, you may continue with your investments in them. If the schemes fail to perform for a year or more, you should examine the reason behind it. If you are not satisfied with the reason, you should consider a proper review of your under-performing schemes.
Don’t stop your SIP at any cost
Whatever may be the reason, please don’t stop investing through SIP. While starting, you won’t have this idea, but when market corrects heavily, or when your neighbour buys a new SUV or your relative buys his third house you will think of taking money out from your accumulated SIP and buying that.
At this stage, this is my Prescription for Prosperity!
Happy Investing!
RaVi
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