Tuesday, June 11, 2024

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4 Tips To Make The Best Use Of Mutual Fund SIPs

Mutual Fund SIPs are one of the most popular forms of investment in India. Systematic Investment Plan or SIP refers to the mode of paying the investment amount in a mutual fund on an instalment basis: be it weekly, monthly, quarterly, or on an annual basis. SIP eases the burden of paying a lump sum amount for investment and rather takes the periodic payment route so that anyone with fixed employment can be a mutual fund investor. With the help of a mutual fund calculator, an investor can easily ascertain the amount to be paid. A mutual fund SIPs calculator only requires data like the amount deposited as SIP, the year up to which the investment is expected to be run, and the rate of returns on the investment amount. An investor can know more about how easy it is to operate it by using it for oneself.

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Tips To Make The Best Use Of Mutual Fund SIPs

Though the market has been slumped by the ongoing COVID-19 pandemic, it has rather turned out to be a blessing in disguise for SIP investors. SIPs perform relatively well in the falling market. This is primarily because given the fact that the mutual units have fallen in value now units can be bought from the same SIP amount with each payment. However, in order to make the most of SIP, an investor can follow these tips.

1. Start Investment In Mutual Fund Early

Start Investment in Mutual Funds

The first important thing about making the most of the mutual fund is to start investing early. Starting in one’s late twenties is ideal to stock up enough for one’s retirement. As mutual funds require time to make investments grow, it is important to give it full access to growth so that the profits can be fully reaped. Warren Buffett started investing as early as the age of 11. However, it is understandable that not everyone can invest early and it is better to invest when one has a job or any other medium of regular income so as to meet the expense of periodic SIP payment. The reason why investing early reaps more in mutual funds is that the mutual funds work on the system of compounding. Hence, the longer the period of investment, the returns are bound to be better. A mutual fund calculator can help one understand how the returns can keep on increasing the longer an investor waits.

Mutual Funds can provide the best returns only if the investment is started early.

2. Increase the SIP Amount

Increase the SIP Amount

There is no limit to the SIP amount or that it is fixed. An investor can increase the SIP amount if his salary is increased and the new growth rate can be checked in a mutual fund calculator. In fact, it is a good idea to keep increasing the SIP amount. Increasing the SIP amount keeps pace with inflation and thereby helps to keep up with the economic pace of the stock market world. Also, with the increased SIP amount, it will become easier and quicker for the investor to realize his goals. Moreover, it is one of the most effective ways of saving. So instead of pu4tting the increment in salary or income elsewhere, an investor can rather put the said amount to his mutual fund SIP amount and see them grow as an amassed fortune over the years.

3. Keep Investing

Keep Investing

The whole concept of SIP is not to put a burden on the pockets of the investor. With periodic payment, the investment amount is split into a nominal sum which is compatible with the investor’s payment structure thereby enabling him to keep consistent with the flow of investment. This is also true for market volatility. During the time of crisis, selling the shares may yield nothing but loss. So the point is to keep investing and wait when the market picks up its pace once again without any interval where the investor has to stop his further deposits.

4. Systematic Withdrawal Plan

Systematic Withdrawal Plan

Systematic Withdrawal Plan or SWP refers to a strategy where an investor can keep withdrawing from his investment in small amounts. This helps him in coping up with his various financial requirements. Hence, without compromising on his long-term investment and the profits to be yielded from them, the investor can easily meet out his needs by withdrawing from the gains or dividends and keep himself well-off both for the present and the future. The changes in the investment amount can be computed and tracked with the help of the mutual fund calculator.

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Following these tips is likely to help the investor in making his mutual fund investment grow big and more yielding. Mutual funds require discipline and patience. If these two are followed along with these tips, then the time will answer such endeavors with reaping profits. It is also important to keep checking the progress of the invested amount by using a mutual fund calculator. Only when the investor is aware of how his investment is going to look like can he make the correct decision with regard to its improvement.

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