A mutual fund is a pool of professionally managed funds that invest in a diversified portfolio of securities for income generation. Markets regulator SEBI has defined mutual funds as “a mechanism to invest funds in securities by issuing units to investors and investing in securities, as explained in the offer document. Investment in securities is a broad cross-section of industries and sectors.” The section is spread out and thus the risk is reduced.” Depending on the nature of the scheme, its asset allocation strategy and its risk profile, a mutual fund can invest in various asset classes and money market instruments such as equities, gold bullion, real estate, commercial paper, certificates of deposit, call money, etc. Is. AMCs employ fund managers who are responsible for formulating a conclusive investment strategy for buying/selling securities and helping the scheme outperform its underlying benchmark.
If you want to gradually build your mutual fund portfolio and build wealth over the long term, you may want to consider starting
sip in mutual funds. SIP is a new and easy way to invest in mutual funds. Due to SIP, it is now possible for almost everyone to invest in mutual funds and give themselves the opportunity of capital growth over a long period of time.
build wealth with sip
Systematic Investment Plan or SIP is an investment process where the investor chooses a fixed amount in which he is comfortable and invests that amount in a mutual fund scheme from time to time. This mode of investment is considered to be far more convenient than lump sum investment, where one must invest the entire investment amount in a mutual fund scheme from the very beginning of one’s investment cycle. Investors can opt for a smaller SIP amount as long as the amount is not less than the minimum investment amount mentioned in the offer document.
Here is an example to help you understand how SIP investment is ideal for long term wealth creation –
Suppose you want to invest 12 lakhs in an equity mutual fund, you can do so by investing Rs. 10,000 per month during 10 years through SIP. This way, only the money you invest per month will be subject to investment risk and not the entire Rs. 1.2 million. At the end of your investment journey, not only will you have the amount that you had saved over the last 10 years, you can also earn additional capital appreciation based on the equity scheme’s performance over the last 10 years.
There are some fund houses that offer a minimum SIP amount of Rs. 500 per month. you can also refer to
sip calculator, a free online tool that helps you determine how much capital appreciation you can earn at the end of your investing journey. SIP is ideal for wealth creation as it is flexible in many ways. If you get additional income or bonus then you can increase your monthly SIP or add it to your mutual fund portfolio. Investors are free to stop their monthly SIP if they are not happy with the performance of the scheme. SIP investment does not have an expiry date. Investors are free to continue investing in mutual funds through SIP till they achieve their investment objective.
The Power of Compounding is an interesting investment technique that benefits SIP investors as well. In mutual funds, compounding refers to the interest earned on the interest earned from the initial investment amount. When you earn interest on the amount you have invested in a mutual fund scheme, this interest starts earning interest of its own. Through compounding, your small monthly investment amount can snowball and help you build a decent corpus gradually. If you continue to invest in mutual funds through SIP for a long time, you can also benefit from another investment technique referred to as rupee cost averaging. Rupee cost averaging reduces the risk associated with market volatility and assures that SIP investors benefit from falling markets as well.
Talk to your financial advisor before investing your hard earned money in mutual funds.
Mutual fund investments are subject to market risks, read all the documents related to the scheme carefully.