SIP is now a popular choice among young investors serious about
retirement planning. But just like any other investment option, you need to be
as cautious as possible with SIPs, especially when you are just starting.
From child’s education, the down payment of a house, to buying a
car, SIP in a mutual fund is now a go-to option for all the different types of
objectives. A very popular reason due to which investors, especially young
working professionals, now invest in SIP is retirement planning.
Young professionals are now increasingly concerned about their
life after retirement. SIPs with their flexibility and excellent returns
potential have attracted a large number of such professionals. But just like
any other type of investment, you need to be as cautious as possible when
starting your SIP journey.
Read the tips discussed below to start investing through SIP in a
safe and rewarding way-
1. Type of Mutual Fund
There are many different types of mutual funds like equity, debt,
tax-saving funds, ETFs, funds-of-funds, balanced funds, money market funds, and
diversified funds. All the different types of funds offer the SIP facility. But
while starting a SIP is easy, selecting the right fund is not.
Consider factors like your objective, risk appetite, and age to
make the right decision. Once you’ve selected a type of fund, compare the
schemes in the category based on their past performance and benchmark index to
pick a promising scheme.
2. Selecting the SIP Amount
Once you’ve chosen a mutual fund scheme for your SIP, the next
important consideration is the SIP amount. While SIPs allow you to start
investing with just INR 500, you should keep your investment objective in mind
when selecting the amount.
At the same time, the amount should be as such that you could
easily afford it every month. This would ensure that you never miss a single
SIP.
3. SIP Interval
When you register for SIP in a mutual fund scheme, you’ll be
required to select a SIP interval. You’ll have options like weekly, monthly,
quarterly, and annual. While monthly duration is the most popular choice, you
can also go for other durations if they better suit your needs.
Remember that AMCs do not charge any additional fee for the SIP
facility. It is free of cost, and you can start or stop your SIP any time.
4. Increase the SIP Amount As and When Possible
Nothing is constant in life, and this applies to your investments
too. As and when your income increases, you should try to increase the SIP
amount too. Even an increase of 5%-10% every year or two can have a significant
impact on your overall portfolio.
It is not necessary to keep investing the increment in the same
scheme. You can also look for other plans to create a diverse portfolio.
5. Review the Portfolio Regularly
If you’re planning to invest in SIPs for retirement planning, one of the most valuable tips is to review your portfolio
at regular intervals. This does not mean reshuffling your portfolio every week
or month.
You should review the investment every six months or so and make
the necessary changes if required.
Starting SIP in mutual funds for retirement planning is now easier
than ever. Everything can be done online within a matter of minutes. But while
starting SIP is quick and simple, there are a lot of things that one needs to
take into consideration. Remember the tips discussed above, and you’d begin
your SIP journey in the best possible way.
