Important Factors Investors Should Keep in Mind Before Starting a New SIP
Systematic Investment Plan (SIP) is a way to invest in mutual funds that allows investors to provide a fixed sum on a regular basis, like monthly or quarterly, rather than a lump sum.
Effective Investment Strategy
Investors should focus on building their long-term mutual fund portfolio on the basis of their age-risk appetite and long-term goals. They can achieve these factors by following an asset allocation strategy and spreading their investment in different areas like gold, equity, fixed income, and REITs/InvITs.
Withdrawal-Free Investment Plan
In an equity scheme, investors should manage a time limit of at least 5 to 7 years and don’t get worried about short-term market ups and downs. Don’t withdraw money from your equity investment while starting a new SIP. If investors want to invest in funds for 1-2 years down the line, they should not start a new SIP in an equity mutual fund.
How to Balance Active and Passive Mutual Funds?
Actively managed funds mean that a fund manager is more involved while making any decision. Passive mutual funds fund managers cannot decide the movement of the underlying assets. A blend of active and passive funds can help investors build a well-rounded portfolio. The main portfolio should focus on long-term funds, while investors add thematic or sector-based funds in smaller portions to try to earn higher returns.
Thinking about Adding a New Scheme?
If an investor has a Rs. 10,000 monthly SIP in the three other categories and wants to increase the SIP amount to Rs. 2,000 monthly, they can choose a thematic or sectoral fund. For a safer option, they can choose a hybrid fund with less focus on stocks. Another choice is to split the extra Rs. 2,000 in their current funds.
How to Pick an NFO?
Many New Fund Offers (NFOs) are well promoted, but investors should be cautious, as some are launched by fund houses just to expand their product range or take advantage of popular market trends. Select an NFO only when a product is not available with another fund house or if it provides strong benefits for your portfolio.
How to Grow Your SIP Investment?
Investors can increase their monthly SIP by adding more money to their current scheme or selecting a new fund for their portfolio. The extra SIP can begin on any date that works best, and selecting different start dates helps spread the investments over the month.
