Mutual Fund SIP: Lifetime Gift for Valentine's Day

Written on Saturday, February 13, 2016
By Jaidev Singh

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When you think of February what is that comes to your mind. Is it Budget, Winter Sports or Adventure trip? But, most of us must be waiting for Valentine’s Day which is just around the corner. You might be planning to celebrate Valentine’s Day with the person you love. What shall you gift to him/her might be the question hovering over you. May be a bunch of roses, trip to a beautiful place, five-star dinner or a precious diamond ring? Since the people we love are most precious to us, we always think of gifting them what they may keep forever or something that can help them fulfill their dreams.


This year, why not buy a SIP for that special someone. That special can be anyone your father, mother or your wife, or daughter; it will not only help them secure their needs but also to fulfill their dreams. A Systematic Investment Plan (SIP)-a fixed sum invested regularly is arguably the best way to put money in a mutual fund. It not only can be started with a small amount that is equivalent to the sum that you spend for dinner out.  You can invest as little as Rs. 500 a month (some funds even allow Rs.100 as the minimum investment) and change the amount as you go along. Most of the mutual fund SIPs offer a lot of flexibility. You can invest on a monthly or quarterly basis. You can choose when to invest from five or six dates in a month. It is very friendly for the investor.


How to invest? You can directly invest with the fund house, through a registrar and transfer agents, or you can also invest through intermediaries, such as distributors, brokers and mutual fund investment platforms. If you wish you can invest directly with the fund which will help you save the commission cost, but you prior to that you need to do your own research which takes a lot of time.


Following are the tips that can help you grow your money through SIPs.


Stay for a long-term

Staying Invested enables, you to even out the market volatility and allows you to bank the advantage of lower prices. Most of the investors tend to lose their money because they invest when market surges and stop when market plunges and because of this practice they defeat the basic purpose of investing through SIP.

Mutual funds work in a very beneficiary manner as when the market slumps, you can buy additional units of mutual fund because the per unit value of the fund falls when the market crashes. These additional units bought could give an edge to you when the market bounces back. So you should hold the mutual fund for at least 3 years till the market cycle complete to benefit from the SIP.


Diversify Your Mutual Fund Portfolio

Buying all the funds of the same type can never be called a brainy move. You should think to diversify as much as possible and it can be achieved by having 3 to 5 mutual fund schemes in your portfolio. One thing that you should always remember is that you should not have more than 5 mutual funds unless you are with surplus money. Also, keep in mind to diversify not only the number of schemes but also the sectors too. So, as a wise investor, if you wish to start SIP let us suppose of Rs.8,000 per month then instead of putting Rs.1,000 in 8 schemes, you can invest for Rs.2,000 in four schemes to maintain the diversification.


Link SIP to Financial Goals

It is important and beneficial before you buy any Mutual Fund try to link your Systematic Investment Plan to your financial goals. Losing sight of your financial goals can result in making haphazard investments. For every investment you make it should be backed by a Goal. These goals can be short term goals like, going on vacation, buying a car etc. or long-term such as children education, children marriage, retirement etc. your selection of the most suitable mutual fund should be based on your future goals and every mutual fund SIP should be linked to one of the financial goal.


Step-Up your SIP

As soon as you move to higher position in the organization or your salary rises, your SIP should also rise in bar in the same proportion this is called Step-Up Approach. It is not necessary that you invest the proportion of the incremented amount in new scheme; rather you can also invest in your existing Mutual funds.


#Mutual Fund investments are subject to market risk. Read scheme document carefully before investing. 

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