Diwali resolution: Start a mutual fund SIP, don’t sell in a hurry; see the result

Systematic Investment Plan, or SIP, in Mutual Funds has emerged as the most favourite investment mode for the Indian middle class who are out to beat inflation in an increasingly competitive financial environment. It is increasingly becoming essential to save a handsome corpus which will be immensely helpful in reaching the financial goals in life like buying an apartment, or a car, or for higher education for one’s kids or meeting unforeseen medical expenditure.

All these seemingly stiff financial challenges can be comfortably met if one starts investing in mutual funds through SIPs from an early age. It involves selecting a few appropriate funds for which you can take the advice of a personal investment expert.

What is a SIP in mutual fund?

A SIP is actually a mode of investment – the words systematic is significant in SIP. It involves investing an amount of money systematically in one or more mutual fund scheme. The investment can be done once a month, once a week or even once a day. But it has to be systematic and should be continued for several years for best accumulation of wealth. One can invest something as low as Rs 100. There is not upper limit. What’s important is that you can watch the value of your investment go up or down every day through online platforms.

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Which Mutual Fund SIP is best?

There can be no unique recommendation for every one. There are several categories of mutual funds which are known as debt-oriented, equity-oriented or hybrid etc. Each category has dozens of funds managed by different mutual fund houses which are known as AMCs (asset management companies). One has to select a fund according to the risk that one wants to take, one’s age, duration of investment and a host of other factors.

How long should I invest in SIP: check calculator

There is no rule cast in stone. However, you must remember that the longer you invest, the higher the chances for multiplying your wealth. The calculator tells you that even if you invest a moderate amount of Rs 2,000 in an equity-oriented fund, it can generate Rs 37.95 lakh over 25 years, if the returns are 12%. Remember you are investing only Rs 6 lakh – the rest are the gains the mutual fund SIP is getting you. If you can stretch the investment for 30 years, the returns can balloon to Rs 70.59 lakh.