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4 Things to Consider When Opting for an SIP

  • Highlights

  • When going for a SIP, choose the right asset class

  • Gauge your risk appetite

  • Analyze the fund’s performance over the past years

  • Calculate the right amount for investment, to meet your needs

Disciplined savings is the basis for a secured financial future. Let us take the example of Ramnath, a 24-year-old engineer, working with a well-known manufacturing company. He is enjoying his bachelor life but is aware of his financial responsibilities and wants to invest his money in building a substantial corpus for the future. He knows about the sluggish growth of money parked in fixed deposits or savings account. He is looking for alternative options but also want to avoid market volatility.

Systematic Investment Plan (SIP) is a smart financial tool to build your wealth over a long time with small investments at regular intervals. It allows the investor to buy units on a pre-decided amount invested at a fixed frequency. It helps in avoiding the risk of ‘timing the market’ and facilitates a disciplined investment habit.

But before opting for an SIP, you should understand its fundamental concepts. To ensure good returns and safety of your hard-earned money, it’s important to choose right mutual funds. Here are a few things you should consider before investing in SIP online:

1. Select the asset class

Mutual funds are designed for different types of investors. Select a suitable asset class based on your risk appetite. Equity funds are suitable for aggressive investors as they carry high risk along with higher returns. Debt and balanced funds carry less risk when compared to equity and are thus more suitable for conservative investors.

2. Analyze the performance

Understand the mutual fund in which you want to invest your money. Analyze the performance of funds over the last three to five years. A thorough comparison with other funds will help you understand the stability of the selected mutual fund. The key is to select funds which can survive market volatility and perform even when the market is down.

3. Select scheme options

One of the important factors to consider is the selection of the scheme option for regular or direct plan. If you want to get increase wealth and reinvest the surplus, go for the growth option. But if you want to get profit payouts at regular intervals, choose the dividend option.

4. Determine the amount

Calculate the right amount for SIP to meet your financial objectives through the investment. You can calculate the SIP amount using online SIP calculators on the basis of your financial goals, time horizon and expected rate of return. Also ensure that you should be able to easily pay the amount for the entirety of the SIP tenor.

It’s imperative to choose an appropriate transaction date and link your SIP investment with your bank account. Choose the right type of mutual fund with Bajaj Finserv for favorable returns and don’t forget to read the offer document carefully before investing.

With Bajaj Finserv, your loan amounts, card limits and insurance is already approved. Get money in bank with 1-step verification, with these special pre-approved offers. Check your pre-approved offer here.

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Step-by-step guide to choosing an SIP