An SIP in mutual fund schemes lets investors invest via regular, small instalments. This is a convenient and disciplined approach, encouraging long-term, consistent investing. However, to maximise the real potential of your SIP, it is crucial to leverage some smart strategies even when investing via the best share market app. This article brings to you some of the key tips and strategies that you must follow to receive the most from your mutual fund SIPs.
Must Follow Mutual Fund Sip Investment Strategies For Investors
When planning to trade in mutual funds SIP, you must follow the strategies given below to get the most out of your investments:
- Start early
Even though it is never too late to begin an SIP, starting early comes with multiple benefits. Most importantly, this mutual fund investment offers you time. With a longer investment horizon, you can begin with small amounts, along with the potential of building great wealth, over time. It expands your financial commitments across several years, reducing stress. In addition, an early SIP investment also gives you the benefit of compounding. The returns that you generate are reinvested, helping you earn more. Hence, the earlier you begin, the better chances you have of creating higher returns in the long run.
- Periodic SIP top-ups
SIP comes with automation, which is a great benefit. It minimises the stress of managing investments actively. However, along with being convenient, it also makes it easy for investors to forget about their SIPs. Therefore, it is essential to review and top up your SIP periodically to make sure the investments continuously grow along with inflation and align with your changing financial goals and lifestyle. You can also focus towards increasing your SIP every year, such as when you have children, get married or receive a promotion.
- Investing in multiple mutual fund schemes
Mutual fund portfolio diversification eventually reduces risk; however, diversification does not eliminate the complete risk. Rather than investing your capital in a single scheme or a single index like Bank Nifty, you must diversify it across multiple stocks.
- Long-term commitment towards a mutual fund SIP
A longer investment horizon potentially enhances your wealth creation. Mutual funds, such as the Equity-Linked Savings Scheme, come with a three-year lock-in period and great liquidity. However, by making frequent withdrawals without any penalties, this eventually interrupts the compounding process and minimises your potential returns. It is essential to offer your investments enough time to grow without any interruptions. Stay committed to your SIPs and avoid early withdrawal for good wealth creation.
- SIP investment on different days of the month
The market fluctuates up and down constantly. As a result, the mutual fund’s net asset value also moves along with it. Make sure to spread your SIP dates across different months to take advantage of such fluctuations. This strategy helps you average out the purchase cost and get the most from emerging opportunities. For anyone having multiple SIPs, it is a simple and effective strategy to consider.
Conclusion:
Even though several factors affect average SIP returns, the strategies mentioned above can eventually help you grow your investments potentially and fulfil your financial goals via SIP, option trading and other investments. That being said, always remember that your final returns might move up and down on the basis of the individual fund performance and market conditions.