So you’ve just finished Rich Dad Poor Dad and you’re all geared up to take charge of your finances and begin investing in the big leagues. Your search for investment options has led you to SIPs, and you’re wondering, are SIP investments good for the long term? How to even invest in SIPs?
Well, you’ve come to the right place. Kool Kanya’s course, Finance Pass: Personal finance made easy has everything you’ll ever need to know on SIPs, mutual funds and investment plans. It’s the perfect finance crash course for anybody looking to take charge of their lives and be financially independent.
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Let’s talk SIPs. Having simple in their name doesn't make these investments any easier to figure out. For first-time investors, it can be a confusing ball to unravel, but don’t sweat it, we’re here to make your research a little easier. Let’s jump right in take a look at what SIPs really are.
- What is an SIP
- Best time to invest in SIP
- 3 bases to cover before investing in SIPs
- An understanding of SIP
- Solid financial goals
- Steady monthly income
What is a SIP?
A Systematic Investment Plan is a service offered under mutual funds which allows you to invest your money in periodic instalments, as opposed to putting in a lump sum. The instalment periods are pre-defined and can be either weekly, monthly, quarterly, semi-annually, or yearly.
The compounding effect of SIP investments makes it a profitable investment option, as the interest earned on your investment will be reinvested, leading to long-term wealth creation.
Best time to invest in SIPs
“The best time to invest in SIP is between September 10th to December 19th”, is not what we’re going to say!
The best time to invest in SIPs is when you are financially ready. Their main advantage when compared to direct investments is that you do not need to keep constant track of market conditions and fluctuations. This holds true for initial investments as well, which means the best time for investing in SIPs depends primarily on your financial condition.
As compared to mutual funds, SIP investments are useful for individuals with a consistent income, who have smaller sums to invest. If you’re ready to play the waiting game then this is the investment option for you. Remember, the earlier you invest the better returns you can expect.
All in all, it is a low-risk start to entering the world of stocks and market risks. But are you ready to start investing in SIPs? Let’s find out!
3 bases to cover before investing in SIPs
- An understanding of SIP
Goes without saying that before you invest in SIPs, you need to know the concept in and out. Set yourself a good foundation by gathering information from verified sources. Speak to friends and family to hear about their experiences. Take in all the information you can before you start out on your own. Your research will be vital in helping you decide which SIP scheme to choose according to your financial situation, risk appetite and investment goals.
2. Solid financial goals
Before you begin investing, you need to know exactly how your investments will fit into your financial plans. Ask yourself what you expect out of the investment in the long term, how you’re going to utilize your profits, and how to regulate deposits. Your investments tie in closely with your financial goals, so if you don’t already have clear targets set out, it’s time to get to it and figure out your financial plan. Some common investment goals to get you started could be:
- Enabling property purchases
- Bolstering your emergency fund
- Family planning
- Retirement planning
3. Steady monthly income
Since SIP investments require periodic instalments, having a steady income is the most basic requirement you’ll need. The minimum investment amount is Rs. 500, and can go as low as Rs. 100 depending on your plan, which means even college students pursuing internships can invest in SIPs. A good way to decide how much to invest is to use an online SIP calculator. These calculators will give you an idea of expected returns by enabling you to input your monthly investment, expected return rate, and time period. Figuring these numbers out in advance helps to get a clear picture of how much you need to invest to hit your financial targets.
Once you have these bases covered, you will be ready to make the leap and begin investing in SIPs! The process can be initiated online and in person, and requires you to first fill out a KYC form. Ensure that you have all your documents in order before you begin the process, and get ready to rake in that dough.
For a more in-depth understanding of how to invest in SIP, sign up for our course, Kool Kanya’s Finance Pass. We’ll answer all your burning questions about how to start a SIP investment, if SIP is good for long term, and much more. So let go of that financial anxiety and come #RaiseYourPower with Kool Kanya!
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