“Mutual funds done right,” and “systematic investment plan, or SIP,” are some of the terms you might have heard from people around you. But what exactly are SIPs, and if you have multiple SIPs running at once, how do you manage them? SIPs are becoming a popular investment tool. Most people mistake it for a scheme or a plan; Rather, it is a way of investing in mutual funds in a regular and disciplined manner. Every month, on a date chosen by you, a fixed amount is deducted from your bank account. This gets invested in the mutual fund scheme of your choice. It doesn’t seem like a burden because it happens monthly, and you don’t need to spend a hefty sum to get started. Savings accumulate over time without much stress and active management. But with so many choices of plans on the market, it can be time consuming to figure out and get started. Let me simplify it and take out some pointers.

First, it is important to set up an emergency fund and 80C tax-saving investments

Debt or liquid funds are better for quick withdrawals for emergency funds and short-term investments with low risk. A good amount would be one that can cover at least six months of your expenses. Putting aside a huge amount like this can be stressful, so a SIP is a great way to plan for it over time. Once you reach your desired amount, keep it invested till you need it. The investor can then switch the amount to another fund to help with any other long-term goals. For 80C investments, there are options for ELSS or Equity Linked Savings Schemes, which have a lock-in period of three years and invest in the stock market. They are high risk schemes and generate returns over a long period of time.

Finding the Right Quantity

To understand the right amount to invest, it is advisable to link investment with a long-term goal and calculate how much you need to save for it, be it retirement planning, children’s education or buying a home. be for Once you know the target amount, work towards it. If you realize that you have to invest Rs. 10,000 per month to reach your goal but you can only spend Rs. can invest. 5000, there is no need to worry about it, as every year you can plan to increase your SIP amount with the increase in income. In the months when you save extra, invest it in the market and top up your existing investments. Maintain your SIPs and do not try to time the market with them. Many of us fear the volatility of the market and how it will affect our investments. SIP is a very prudent way to manage it. Since you buy a small amount every month, daily fluctuations affect your investment only marginally. The cost is averaged out over a period of time, and we should buy units as well as stay invested during market downturns. If we buy units at a lower price, it will generate higher returns over time and increase the average return.

Change fund or stop SIP

Many keep changing their funds based on their ranking or performance. It is not wise to run after consistently performing funds. Check whether your funds are giving you returns above the industry average or outperforming your benchmark. If yes, then stick with it for a long time. If you cannot afford to pay the installments for a few months, opt for stopping the SIPs instead of stopping them. You can pause your SIPs for three months, after which they restart automatically. Many times, after stopping, we delay in resuming investments, which hinders us from achieving our goals.

When to start?

The right time is now as long as you are healthy and can earn. I like to explain this through the story of the grasshopper and the ant. During summers, grasshoppers enjoy the sun and rest here and there. He saw the ants gathering food and working hard. He mocked them and asked them to live life a little. The ants did not pay attention and kept on working. Come winter The grasshopper was shivering in the cold and was looking for shelter. Only then did he see the ants enjoying the winter with the food they had stored up over time. So come winter, we want to avoid ending up like grasshoppers by looking to others for help. Being an ant is more peaceful and fun, and we might even get to help the grasshopper.

Views are personal: Author – Nidhi Roongta is the founder of Invest My Paisa


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