Important factors to consider when picking a Smart SIP

  • Posted By : reliancesmartmoney.com
  • Wednesday Jan 02, 2019

Starting a SIP (Systematic Investment Plan) just because you’ve been told it’s a smart financial move is like starting a journey without knowing the destination. Like most investments, it is essential to know why you want to start a SIP. 

Do you intend to build a corpus for your retirement, fund your children’s education, or buy a house? Once you know your goal, you can then pick a SIP. SIP facilitates the accumulation of investments over time through a disciplined and consistent method that could eventually help generate the desired results. 

So, instead of opting for a SIP because your friends are doing it, take a moment to understand what is a SIP and how to choose the right one for you. 

What is a SIP?

A Systematic Investment Plan (SIP) is a type of investment that helps invest in mutual funds  in a systematic and automated manner. A pre-determined fixed amount is debited from your bank account, every month, and invested into one or more mutual funds. Tools like RoboAssist  recommends smart SIP schemes and enables you to choose the right investment plan that best suits your needs. 

Starting a SIP (Systematic Investment Plan) just because you’ve been told it’s a smart financial move is like starting a journey without knowing the destination. Like most investments, it is essential to know why you want to start a SIP. 

Do you intend to build a corpus for your retirement, fund your children’s education, or buy a house? Once you know your goal, you can then pick a SIP. SIP facilitates the accumulation of investments over time through a disciplined and consistent method that could eventually help generate the desired results. 

So, instead of opting for a SIP because your friends are doing it, take a moment to understand what is a SIP and how to choose the right one for you. 

Factors for Choosing a SIP Mutual Funds

There are plenty of recommended SIP options out there, but you need to consider a few things before you pick one:
1. Know the value of your goal
2. Decide the term and the asset class to reach the goal

Know the value of your goal

Only knowing your goals isn’t enough. You need to determine a monetary value to it too. For instance, if higher education is your goal, you need to consider its total cost and how much it is likely to cost you in the future. This could help you determine the monetary value of your goal. This, in turn, could help you decide how much you need to save through the SIP to achieve your goal. 

Decide the term and the asset class to reach the goal

It is also important to know the tenure of your goal and the type of assets you’ll need to invest in. A short-term goal is something that could be achieved in a year or two. These goals could include buying a bike or funding a holiday. Such goals have a short investment horizon and need safe and steady returns during the tenure of the SIP. Therefore, liquid funds  or short-term debt funds could be ideal for short-term goals.
Medium-term goals have a minimum investment horizon of three to five years. Such goals could include planning a wedding budget. You’ll need to exercise caution with such a plan and choose a mixed asset class of debt or equity funds or balanced funds that offer comparatively long-term capital gains. Long-term goals are usually the ones that are over five to ten years. These could include your retirement plan or higher education for your children. Countless studies have proven that equity-oriented mutual funds are an excellent choice for such long-term goals. 

Conclusion

Now that you know what you need to consider for a SIP, pick the amount and select a fund that suits your goals. Stick to one plan and embark on your journey of wealth creation that will help you achieve your goal.  Investing via reliancesmartmoney.com, a one-stop online place for all your investment needs will give you an opportunity to explore multiple investment options.

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