Investing is a powerful tool for wealth creation over a chosen period, and one popular method that has gained considerable traction in recent years is systematic investment plans (SIPs). SIPs offer a disciplined approach to investing, allowing individuals to invest small amounts regularly in their chosen mutual fund schemes. This article explores the concept of investing in SIPs and highlights more on the concept of tools such as the SIP calculator.
What is SIP?
A systematic investment plan (SIP) is a method of investing in mutual funds where an investor contributes a fixed amount of money at regular intervals, such as daily, weekly, monthly, or quarterly. The fund chosen by the investor should be based on their risk bearing capacity as well as goals. This regular investment approach helps in reducing the impact of market volatility and allows investors to benefit from rupee cost averaging. To invest in SIP is particularly suitable for individuals who want to invest in the stock market but may not have a large sum of money to invest upfront.
Considerations for SIP Investing
Here are certain pointers for investors to understand before they want to invest in SIP–
Long-Term Horizon: SIPs are designed for long-term investing. While short-term market fluctuations can occur, investors should maintain a long-term perspective and stay invested for several years to reap the benefits of compounding.
Fund Selection: It is crucial to select the right mutual fund(s) for your SIP investment. Consider factors such as the fund’s performance track record, expense ratio, investment philosophy, and the fund house’s reputation. Diversifying investments across different mutual funds and asset classes can further reduce risk.
Monitoring and Review: Regular monitoring and review of the SIP investment are essential. While SIPs are designed for a hands-off approach, periodic assessment of the fund’s performance and alignment with your investment goals is crucial. If required, adjustments can be made to the investment amount or the choice of funds.
To facilitate the process of SIP investing, a financial tool available online can help investors immensely is the SIP calculator. It is not just a tool, it is a guiding light for retail investors to make a sound financial plan and a stronger portfolio. Suppose, a student invests Rs. 7,500 every month in a chosen SIP, over a period of 10 years. Given the rate of return is 12% p.a. , the estimated future corpus would be Rs. 17,42,543. This calculation was processed accurately due to the SIP calculator. It helps in getting a fair estimate of the future value of your investments.
Another SIP calculator that helps investors is the target SIP calculator. Here, one enters the value they wish to reach in their corpus after investing for a certain period. Then, this tool tells you how much to invest monthly in SIP to reach this value. Suppose Ms. Radhika wants to reach a corpus of Rs. 25 lakhs after 30 years through her SIP Investment. Then, taking assumed rate of return as 12% and inflation as 5%, we find out that the ideal monthly SIP Investment for her would be Rs. 3,092. This calculation was done in seconds using a target SIP Calculator.
Conclusion
In this read, we focused on how to invest in SIP, an analysis of the SIP calculator and layers of the tool, to understand how it helps investors in financial planning.
