Investing helps maintain financial stability in the long term. The returns that the investment produces provides security as well as profits. It is good to enjoy the present, but it is also essential to live for the future. For those looking to increase their savings over the long term, a SIP investment plan is a good choice. There are reputed financial advisors such as FinEdge who can help you grasp the nitty-gritty of this financial instrument.
SIP investment plan is the most common choice to invest through mutual fund plans to create long-term capital for retirement.It is an investment approach offered by mutual fund firms in India under which an investor periodically invests a predetermined amount instead of lump-sum to minimize the risk in a volatile market.
Here are three tips which will help you get high returns with a SIP investment plan:
Start early with your SIP investment plan.
When you are trying to create a diversified portfolio for your mutual fund investments, it is highly necessary to start early.The sooner you start, the more time your investments get to be compounded over time. You cannot imagine what this can do for the creation of your wealth.
Compounding, on the whole, means investing back the returns that investment has generated. This generated return is added back to the principal, and then the investment produces additional profits on the enhanced principal. It is a compelling concept and can turn even small amounts into a substantial sum of money over time.
Choose the best mutual funds for your SIP investment plan
It might sound like a no brainer, and it is. Selecting the best mutual funds will give you the best returns.
However, if you only use star ratings available online for funds as the selection criteria, you may fail to invest right. What you need is a system through which you can pick the right mutual funds.
Here are the following things to consider while choosing the best mutual funds:
- Separate funds into correct buckets before comparing them. Since there is no sense in matching a large-cap mutual fund with a small-cap mutual fund.
- Compare funds across several different timelines and not even one (using rolling percentile returns).
- Compare not only returns but also consider the risk of exposure to returns.
- Check the recent performance – if the momentum is in favour of a fund, it probably will continue to do well.
- Rely on quantitative factors such as the credibility of investment managers, the AUM of fund schemes and how the fund performed during difficult times.
Keep your portfolio optimized
The funds you choose to invest may only be giving good returns for now. But if you have assessed the funds right, there is a chance that you will be able to generate significant wealth over time. Hence, you must make sure you invest your money in the right mutual funds.
Suppose you pick, for example, the best mutual funds according to the latest list by IRDAI. Fast on to the year 2023. So, do you think the same funds will always be the best? If not, why do you want to risk investing in them? It is where you must keep your portfolio diversified and optimized. Choose to invest in different mutual funds to get high returns with your SIP investment plan.
The best way to generate wealth is by analyzing the investment mechanism. To lead a comfortable lifestyle or to fulfil the dreams, investing the money smartly is essential to obtain good returns. That’s what a SIP investment plan helps you with. However, if you find it challenging to select the right investment plan for SIP, then you can opt for reputable financial advisors such as FinEdge to help you plan your investment. So, do not wait and invest now.