Imagine you could hire someone to go the gym in place of you. And you could still build a great physique. Not sure if it’s possible with gym, but it’s quite possible when it comes to investing in Mutual Funds. When you start an SIP, the financial experts invest your money in the market to get you the best possible returns. But you need to keep a few things in mind.
Are you investing enough?
Well, that depends on your goals. Over 10-year period, large cap and mid cap equity funds have given annualized returns of roughly 12% and 16% respectively. So, keep your goal and timeline in mind. Do your math. Work backwards to arrive at a required monthly investment.
Investing too much?
Before you start an SIP, you should keep some of the expenses, emergencies in your mind. So, SIP’s doesn’t seem like burden when there is a medical emergency or unexpected job loss. So, start low. And slowly, increase your SIP once you create an emergency fund.
Timing the market is a great idea when you invest a lump sum amount. Not when you invest through an SIP. Most people make a mistake of stopping their SIP’s when the market are correcting. Don’t do that. Because you will miss out on an opportunity to own units at a lower cost when market corrects. You don’t quit your gym the month you don’t lose enough weight. You rather work harder.
Don’t stay single
Never invest in a single scheme. Some schemes will outperform in the first five years and some in the next 5 years. So, you not only should stay invested for a long term, but also need to diversify to average out the returns.
SIP’s allow for your bank account to be automatically debited on a given date. Don’t choose a random date. Pick a date which is 4 to 5 days after the usual date of salary credit.
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*Mutual fund investments are subject to market risks, read all scheme related documents carefully.