As a new investor if you wish to invest in mutual funds or make new investments to achieve your financial goals, then you would have wondered if this was the right time to invest in SIPs.
Investors generally believe that if they invest in rising markets, they will earn lower returns because further growth may be limited.
The meaning of SIP in mutual fund is that you invest a certain amount at regular intervals on a weekly, monthly, quarterly or bi-annual basis.
Any time is a good time to start investing through an SIP in mutual fund meaning as long as you invest regularly despite the market conditions. Timing the market can be a meaningless activity as it is challenging to predict market behaviour.
Investing via SIP in mutual fund means timing the market becomes futile and you can focus on ‘time in the market’. When you invest in SIP meaning investment, you acquire more mutual fund units when prices are low so when the market rises, it results in higher returns. When prices are high you acquire fewer mutual units when prices are high. This lowers your average investment cost over a period. However, one should note that investing in SIP are subject to market risk and do not assure a profit or returns or protection against a loss in a downturn market.
It is important to consider the following factors to get the best out of your investment:
1) Select worthy schemes
Different mutual fund schemes have different investment strategies, objectives, risk profile, etc. Select schemes that meet your financial goals, risk profile, and investment objective. Also consider qualitative parameters like the efficiency of the mutual fund house’ systems and processes, the fund management team, and portfolio characteristics. Once you have determined your requirements, select the mutual fund scheme by examining risk-reward parameters. Do not be fixated on the fund’s past performers because past performance is no indicator of future returns.
2) Invest the right amount
Though the mutual fund scheme is good, you could fall short of reaching your goal, if you do not invest a sufficient amount. The amount to be invested regularly will depend on your desired corpus as well as the investment goal. Use an SIP calculator to calculate returns to be earned on the investment amount meant to receive from SIPs. You should adjust the investment amount for inflation.
3) Ignore the market noise
Erratic market conditions can make investors nervous about investing further. You may decide to stop or redeem your SIP investment whenever the market turns volatile. However, you can partake of the benefits of SIP investment meaningfully only if you invest regularly despite the market conditions.
If you stop SIP or miss instalments, you might forgo the advantage of compounding and thus miss your investment target. Therefore, it is important to continue investing till you meet your goal.
Keep in mind that equity investments take time to grow. In case of SIP, give each instalment sufficient time to grow and generate long term risk adjusted returns. As you start approaching your goal, gradually reduce your equity exposure to invest in a more stable and less risky investment avenue, such as debt mutual funds and bank deposits.
Disclaimer: The views expressed here in this Article / Video are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. Quantum AMC / Quantum Mutual Fund is not guaranteeing / offering / communicating any indicative yield on investments made in the scheme(s). The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader. The Article / Video has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and views given are fair and reasonable as on date. Readers of the Article / Video should rely on information/data arising out of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments. None of the Quantum Advisors, Quantum AMC, Quantum Trustee or Quantum Mutual Fund, their Affiliates or Representative shall be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary losses or damages including lost profits arising in any way on account of any action taken basis the data / information / views provided in the Article / video.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.