If you haven’t ventured into investing yet, it’s high time to consider making it a regular practice. If uncertainties about the stock market are holding you back, start by investing a small amount. As trust builds, seize every opportunity that comes your way.
For newcomers in the investment landscape, mutual funds should be the primary choice. In my personal experience, I commenced a Rs 1,000 SIP in 2017. Even with my first salary, I allocated funds for my SIP, and to this day, I continue the practice. Despite having limited experience, the thought of discontinuing or halting my SIP never crossed my mind. I initiated two more SIPs tailored for different goals, albeit with slightly varying amounts compared to the initial one. The key is to start small, gain confidence, and progressively explore additional investment avenues.
SIP
A systematic Investment Plan, commonly known as SIP, is an investment strategy that allows investors to contribute a fixed amount regularly (typically monthly) into mutual funds. It provides a systematic and disciplined way to invest in the financial markets over an extended period. If you are struggling to invest regularly in a disciplined way, then you should opt for SIP.
Benefits of Regular SIP
Affordability and Accessibility: One of the primary advantages of SIP is its accessibility to a wide range of investors. With a minimum investment amount often as low as Rs 500 or Rs 1,000, SIP makes it feasible for individuals with varying financial capacities to participate in the stock market.
Rupee Cost Averaging: SIP adopts the principle of rupee cost averaging, mitigating the impact of market volatility on investments. When markets are high, the fixed investment amount buys fewer units, and when markets are low, it buys more units. Over time, this strategy averages out the cost of investment.
Disciplined Investing: SIP instils financial discipline by encouraging investors to commit to a regular investment schedule. This consistency helps inculcate a savings habit and reduces the temptation to time the market, which can be challenging and often counterproductive.
Compounding Benefits: The power of compounding is harnessed effectively through SIP. As returns are reinvested, investors benefit from the compounding effect, leading to the growth of both the principal amount and accumulated returns over the investment horizon.
When should you start the SIP?
The secret here is that there is no good time or bad time to start a SIP. If you are wondering about the market being at an all-time high and the possibility of a downturn causing losses, ask yourself a crucial question: Is your SIP intended for a short duration, like 2-3 months? Most likely, the answer is no. This implies that you have initiated the SIP with a long-term perspective, perhaps spanning 3-5 years. In such cases, refer to the benefits mentioned above to gain a better understanding of the advantages that accrue over an extended period.
When Should You Redeem, Stop, or Exit?
I would suggest never, but there are many instances where you need to redeem, stop, or exit from the SIP.
For example, when the targeted amount for which you started SIP has been achieved or when your goal, such as buying a car, has been met, you may consider withdrawing. Another instance where you should book profit is when your fund is not performing well and is unable to beat the benchmark or its peers. If you are invested in the same category of funds or the same sector, like infrastructure, you should consider booking profit from the underperforming one and switch to some other category for better performance. Are there any golden opportunities available where your invested money will give excess returns?
Best Schemes to Start Monthly SIP
Now it’s time to explore the best funds where anyone can start an SIP of Rs 1000 per month for the long term. These funds are five-star rated schemes, and their historical returns across different time horizons are mentioned for reference.
| Scheme Name | Category Name | Return | ||||
| AUM Rs Cr | 1Y | 2Y | 3Y | 5Y | ||
| SBI Contra Fund – Regular Plan – Growth | Contra Fund | 21481.78 | 26% | 40% | 56% | 121% |
| JM Flexi Cap Fund – Growth | Flexi Cap Fund | 1237.57 | 30% | 43% | 54% | 95% |
| Bandhan Core Equity Fund – Regular Plan – Growth | Large & Mid Cap Fund | 3483.91 | 29% | 40% | 50% | 88% |
| HDFC Large and Mid Cap Fund – Regular – Growth | Large & Mid Cap Fund | 15021.94 | 26% | 38% | 49% | 94% |
| ICICI Prudential Bluechip Fund – Growth | Large Cap Fund | 47928.62 | 21% | 30% | 38% | 71% |
| Nippon India Large Cap Fund – Growth | Large Cap Fund | 20217.64 | 20% | 31% | 42% | 77% |
| Nippon India Growth Fund – Growth | Mid Cap Fund | 23494.65 | 30% | 44% | 56% | 112% |
| HDFC Mid-Cap Opportunities Fund – Growth | Mid Cap Fund | 56032.99 | 30% | 47% | 61% | 114% |
| Nippon India Multicap Fund – Growth | Multi Cap Fund | 24590.17 | 23% | 37% | 53% | 99% |
| Franklin India Smaller Companies Fund – Growth | Small Cap Fund | 11397.83 | 32% | 49% | 63% | 124% |
| Nippon India Small Cap Fund – Growth | Small Cap Fund | 43815.61 | 31% | 47% | 66% | 150% |
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.
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