Overall understanding SIP is a good way to proceed before going ahead with mutual funds. If the understanding is not right, it is best for the individual to go ahead with SIPs based on the risk such funds are exposed to. Also, it is a good practice to talk to experts who have been investing in mutual funds for a long time.
SIP, known as Systematic Investment Plan, is a very smart way of investing in mutual funds. In this investment, people need not worry about renewing their monthly payments. You can start a SIP plan with a small amount and you do not need to disrupt your monthly household budget. When opting for a SIP plan the investor need not worry about paying manually. The money gets debited automatically from the investor’s bank account. You can directly invest a particular amount every month from your bank account on a mutual fund and this is a secure investment. The investor is allocated certain number of units based on the current market’s rate (called the Net Asset Value). You can choose different investment and you can pay a fixed amount on monthly basis, or you can choose quarterly, half-yearly or yearly plans. Even you can also go for one time investment on mutual fund, and you can see the return on your online dashboard.
How To Select The Best SIP In Mutual Fund?
After knowing the basics of a SIP, it is important for an individual to understand how to select the best SIP plan in mutual fund. Before going into the tips, one has to be very clear about his or her long-term or short-term goals, willingness to take risks, and how the investment pipeline looks like for 5 years. Once the investor is clear on these three factors, then the tips can be looked at in detail.
- A Conservative Investor – If you take conservative risk, then you can opt for a balanced scheme that is equity oriented or you can choose some large cap schemes. There is no waiting period for these schemes, but to get the best return, you need to run such SIP plans for a longer period.
- A Moderate Investor – If you do not want to take high risk and look for a SIP plants with moderate risk then you can opt for multicap or largecap, also called diversified equity plans.
- An Aggressive Investor – If the individual considers himself/herself to be an aggressive risk taker, he/she should smallcap or midcap schemes. Also, this type of investor can opt for a sectoral plan if he/she is well aware of the sector schemes.
The best idea is to opt for a combination of schemes to create a risk-diversified portfolio. An example is that one can go for a combination of small, medium, and large cap schemes.
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