New Delhi (India), June 1: Indian millennials are among the lakhs of people in India who tend to prefer SIPs as their go-to mode of mutual fund investments. If you are an Indian millennial who wants to know how you can build wealth and achieve your financial goals through SIPs, read on.
Why are SIPs popular among Indian investors (especially millennials)?
SIPs help millennials actively grow their wealth over time: Unlike savings accounts or FDs (fixed deposit accounts), SIP investments help investors actively participate in their mutual fund investment journey. As an SIP investor, you can choose to increase your SIP contribution or diversify your investment at any time. Millennials prefer SIPs as they offer an active and convenient method of short-to-long-term investing.
They leverage the power of compounding: Systematic investment plans help millennials benefit from the power of compounding. Investors can earn interest on interest by making consistent SIP contributions towards a mutual funds scheme. SIPs can also help millennials benefit from rupee-cost averaging.
SIPs offer flexibility and help millennials invest consistently: SIPs offer higher flexibility when compared to the lump sum mode of investment. A first-time millennial investor can start their SIP investment at just ₹ 500 and can exit the investment at any time. SIPs also help millennials develop the habit of disciplined investing. Millennials who are salaried individuals can leverage SIPs to earn higher returns through goal-based investing.
Steps that millennials can follow to effectively invest in SIPs
Jot down your investment objectives: As the first step, you must note down your financial objectives. This could be something as simple as “Planning for my retirement” or “Planning for my child’s higher education”. You must note down the amount that you will require to meet your financial objective by a given year. An online SIP returns calculator can help you do this. You can know the SIP amount that you must invest monthly to meet a specific financial objective using this calculator. Noting down your financial objectives can also help you know the ideal tenure for your SIP investment.
Assess your liquidity-related requirements and risk appetite: If you are looking for a mutual fund that offers higher liquidity, you can consider investing in a liquid mutual fund. You must also check the fees charged by the mutual fund schemes upon redeeming units. You should also thoroughly assess your risk appetite before investing in a mutual fund scheme.
Shortlist a few mutual fund schemes and compare them using an SIP returns calculator: Next, you must shortlist the mutual fund schemes that interest you. You can use an online SIP returns calculator to compare these funds to check the one that yields most returns. You can also consider ‘tax efficiency’ as a comparison criterion and shortlist the funds that help you earn the highest tax-adjusted returns.
Start small, and gradually increase your contributions: Finally, you must start investing in the fund through small SIP contributions. Remember to gradually increase your contributions over time. Doing so will help you benefit more from the power of compounding.
In conclusion, SIPs help you develop a disciplined approach to investing and help you leverage the power of compounding to increase your wealth over time. You can use an online SIP returns calculator to earn higher returns through goal-based investing.