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Systematic Investment Plan (SIP) to grow money

Systematic Investment Plan (SIP) has emerged to be the most popular scheme of Mutual Funds among the middle-class investors in India. SIP is a mode of financial investment much like a recurring deposit in banks. But the difference is that banks provide you a limited percentage of interest in your capital whereas the return of SIP depends on the present market scenario. Like recurring deposits in banks, you invest a particular amount at a regular interval. But unlike bank deposits, you bear the possibility of loss and a chance of higher return when you invest in a SIP of a mutual fund. Some SIP in mutual funds fall under the ELSS category; hence you save tax too with such investments. There are so many SIPs across the Indian market, so it is not easy to find out the best SIP to invest in. You need to check the details of the SIP, the reputation of the company, the scheme where they invest, and the record of the past few years.

You need to choose a particular plan of SIP of a mutual fund. The amount will be deducted from your bank account at a regular interval. You will be provided the units of the mutual fund as per their Net Asset Value (NAV). According to the present market value, units are added to your account after each installment is paid from your side.

Why invest in SIP

SIP is a goal-based investment that makes you a disciplined investor in order to fulfill your future goals. A systematic investment plan enables an investor to invest directly in the stocks, bonds, debts, and equities of big companies with a minimum amount at regular intervals. So, the chance of a big return is quite high and you bear a minimum risk factor. SIPs in Mutual Funds are managed by financial experts; hence you get the best out of the market. You can invest online judging the schemes of all existing plans in the market. Hence, it is a hassle-free way of investment for the next generation investors. As you can invest online in SIP, you almost don’t have to pay commission to any middle man. Hence you get the maximum benefit of your investment. There are so many schemes in SIP to make it a more investor-friendly scheme in the market. You can set the tenure of your investment and the amount as per your goal. SIP plans are flexible in nature. You can add an additional amount to your installment through the scheme of top-up SIP. A flexible SIP scheme helps you to increase or decrease your installment as per your status of income and financial goal. Through the perpetual scheme of SIP, you can withdraw your money whenever you need it. SIPs under ELSS scheme helps you to get tax benefit under 80c act of Indian Income Tax. But such SIPs have a minimum lockin period of three years.

How to choose the right SIP?

Choosing the correct SIP is a matter of concern when you want to get a handsome return and fulfill your financial goals through mutual fund investments. The first thing is to find out a plan that suits your financial goal and eligibility. You set your term (long/short/medium), amount to invest monthly, and calculate adding the compound interest to see if this meets your financial goal. Have a sincere study on the existing markets and the return they made in the last five years. Find out the mutual fund that provided the best SIP in terms of average return over the years in the particular scheme that you are thinking of. The best way of an SIP nowadays is that you can invest online according to your investment goal and risk appetite. You may consult an AMFI registered mutual fund distributor to choose the best SIP for your investment portfolio.

Principles of High Return in Mutual Fund Investments

Returns in Mutual Fund Investments

When you think of high returns of your financial investments in Mutual Fund investments, you have to think of high-risk factors too. You can never expect high returns without the probability of high risk. Mutual funds across the globe invest in several funds like equity funds, debt funds, bonds, stocks, etc. Let’s see what type of investment in a mutual fund gives you a high return and which among those provide you a secured return. Mutual Fund investments are goal-based investments and the return in it is dependent on several factors like your risk appetite, investment period, capitals, mutual funds’ portfolios, etc.

Low risk, secured return

Among the mutual fund investments, investments in large-cap funds are proven to be less volatile. Mutual funds in India invest in 100 best stocks in the market in such large-cap funds. As these companies are stable in their performance, they mostly offer a systematic return to their investors. Investors need to invest for a long-term in large-cap funds to receive the desired outcome. Most of the large companies run on debts; hence investments in large-cap funds are mostly done in equity funds. Though the return factor is not satisfactory in such a fund, people are interested to invest in large-cap funds for security. Almost all mutual fund companies give you the option to invest in large-cap funds. As mutual funds investments are subject to market risk, no investment is beyond the sphere of risk factors. Investors need to be prepared for moderate risk in such financial investments.

Medium Risk, Moderate Return

Investments in mid-cap funds offer you a comparatively better return possibility and it brings comparatively more risk than high-cap funds. Such investment is more volatile because stocks are chosen for these investments generally rank between 100-250 in terms of market capitalization. The stocks of such companies are less stable in their performance than the stocks of high cap funds but they can produce more return than the high cap funds. These funds are suitable for those who can invest their money at least for 3-4 years and can accept a moderate loss at the end.

High Risk, High Return

Small-cap funds are the most volatile funds for your investments in terms of return and risk factors. Mutual funds, which are investing in small-cap funds, are known to be high return mutual funds. Investors who like to take the risk for the largest amount of return can invest in small-cap funds in mutual funds. Mutual funds investments in such category select stocks that rank more than 250 in terms of market capitalization. These are the stocks of the newest companies; hence the whole profit or loss depends on the performance of such stocks in the present competitive market scenario. Small-cap funds are famous for their historic return. Almost all mutual funds offer you investments in small-cap funds because enthusiastic investors, who can take the risk for high return, are growing day by day. If you want to invest in small-cap funds, you have to be patient for at least 3-4 years for getting the desired return. But, before investing in such schemes, you need to be aware of the high-risk factors too.

To sum up

Mutual fund investments have high potentiality, but you cannot expect a big thing in a very short span of time. These are goal-based investments that need a longer time to get the desired outcome. The most important thing for an investor is patience. If you think of a secured return, investments in large-cap funds are suitable for you. If you can take risks for comparatively higher returns, invest in medium and small-cap funds. You can get all the information about the risk factors, market capitalizations, holdings, portfolio, etc online on different financial investments‘ websites. Even you can invest online in your suitable schemes of mutual funds. Study the market wisely, read all the documents carefully, and invest for at least 3-4 years for a handsome return in mutual funds. You can consult an AMFI registered Mutual Fund distributor for the best fund allocation for you.

Things to know before you invest in Mutual Funds

Once upon a time, financial investments in stocks, or bonds were rich men’s games. Thanks to the mushrooming of mutual funds in the Indian market to make the small and medium investors invest in the big funds and bonds. When you are investing in equity PMS, you need your personal portfolio manager for a higher-cost service and need to possess a high amount for investment. When you invest through mutual funds, you share the cost of portfolio management and the price of a stock of a big company. Mutual fund investments have become the buzzing words in the fields of financial investments in the global market even in the growing economy in India. This is just because of the fact that it has opened up the market of financial investments to the middle class and lower-middle-class people in India.

A Mutual Fund is operated by an Asset Management Company (AMC) that collects funds from individual and institutional investors to invest in securities like stocks, and bonds with a common investment goal. Individual investors invest in the share of a mutual fund; it means when you invest in a mutual fund, you own the share of that mutual fund company as well as the company in which that mutual fund is investing. A mutual fund is a gateway to invest in multiple plans and financial goals. This is the most popular mode of goal-based investing in which you can invest online in all existing funds in the market.

Terms you need to know

Portfolio: In finance and investments, a portfolio refers to the collection of your assets that include cash, stocks, bonds, investments, real estate, etc. Managing your portfolio is an important task mainly for investors. So, many people hire their personal portfolio manager, and financial advisor to know how they should distribute their wealth and investments. Many people prefer to manage their portfolios themselves and some depend on banks, mutual funds, and other financial institutions to manage their portfolios. A professional portfolio manager designs the portfolio of an investor keeping in mind the risk factors, investment goals, and duration.

Stocks: Stocks refer to the certified partial ownership of a company. Stocks are made of shares, which is the smallest fractional ownership of a company. You can buy and sell stocks simply online through your Demat account offered by many banks and financial institutions in India. Investing in stocks and shares has high potential and equally high risk because your profit and loss depend on the market value of the stocks of a company. Otherwise, you need to pay tax and other surcharges while investing in stocks. But the stock market is regulated by the government itself; hence there is no chance of fraud. Stocks are mainly of two types: common and preferred. The common stockholders have voting rights and they play major roles in decision-making for the company. On the other hand, preferred shareholders are merely investors and their return depends on the profit and loss of the company.

Bonds: Bond is the loan offered by the investors to corporate, government, and public bodies like municipalities for running any project. When you buy a bond, you directly give a loan to the corporate or government bodies that pay you interest on a regular basis. Owners of the bonds are known to be debtholders who get their principal and a fixed rate of interest from the corporate or government bodies after a specific period of time. Unlike stockholders, a debtholder knows well his return. They can buy and sell debt securities in the bond markets. When you buy bonds, you act like a bank to the borrowers who take your money for investments and give your principal return with a fixed rate of interest.

Equity: When you buy equity, you buy partial ownership of an asset that might have debts and other financial liabilities. Equity is calculated by subtracting the tidal liabilities of the company from the total value of its present assets. Equity refers to the assets that might be distributed among the shareholders of the company after liquidating the assets and paying off all the debts and financial liabilities.

The Mutual Fund companies create a common portfolio on the basis of market conditions and arrange the percentage of investments in stocks, bonds, equities, and other assets. Then it collects capital from individual investors and invests as per the organized plan. It means that when you invest in Mutual Funds, you invest in the shares of the mutual funds as well as the share of the companies for which the mutual fund is investing. The whole process is monitored by the maestros in this field, hence you get the probability of maximum return with minimum risk factors.

Types of Mutual Funds

Debt Funds: IN Mutual Fund, Debt Funds consist of so many popular plans like Monthly Income Plans (MIPs), Short Term Plans (STPs), Fixed Maturity Plans (FMPs), etc. In debt funds, your money is invested in fixed securities like corporate bonds, government securities, etc. Debt funds are very popular because it produces fixed incomes for investors.

ELSS (Equity Linked Savings Scheme): Equity Linked Savings Scheme or ELSS has become so popular among the taxpayers in India because investment in this scheme of Mutual Funds helps you to save tax under section 80C of Income Tax Act 1961. An individual investor can invest up to Rs 1.5 lakh in this scheme to save yearly tax. This scheme normally has a lock-in period of three years.

Hybrid Funds: Hybrid funds in Mutual Funds refers to a fund that is a combination of several high potential investment options like stocks, bonds, and cash.

Liquid Funds: Liquid funds are known to be the safest fund in Mutual Funds that can grow your money within a very short span. This is one kind of debt fund through which liquid investments are made for the big corporates for a maximum 91 days’ period.

Equity Funds: In Mutual Fund, equity fund investment is made mainly for the stocks. Equity funds are also known to be stock funds and its size, and prospect depends on the nature and outcome of the company it is investing for.

Focussed Funds: Mutual funds mostly invest in a number of companies according to their present market value. Focussed funds are less diversified than the traditional schemes of mutual funds. Focussed funds invest in select stocks of mostly 20-30 companies; whereas most of the mutual funds invest in almost 100 companies.

Why Mutual Funds are the Next-Gen Investments

Mutual Fund investment is goal-based investing and flexible. You can invest from a very small amount to a bigger amount. You can choose big companies as well as small and potential companies.
Mutual funds combine various types of investment opportunities like stocks, bonds, equities, etc. It is a complete package to invest in several investment items at once.
A mutual fund is managed by skilled professionals. You don’t have to hire a professional portfolio manager for managing your financial investment portfolio, rather you share the price of management with so many prospective investors like you.
A mutual fund is the gateway of so many investment plans like SIP, investments in securities, stocks, and bonds.
Mutual funds are owned by reputed banks, financial companies, and big corporates. Hence, it has gained people’s trust over the course of time.
Mutual funds investments save your time, money, and energy. Everything you do invest online sitting in the comforts of your home.
When you invest in a mutual fund, you don’t invest in a specific stock. Hence, you share the risk factor too.