It is 2023, a world where fast-paced living has become the norm for most people. Busy schedules, long office hours, personal commitments, and never-ending errands have made it challenging for people to give sufficient attention to their financial investments. However, regular investing is crucial for anyone who wants to secure their future financially. That’s where an SIP or a systematic investment plan can offer help.
An SIP is a disciplined and automated way of investing in mutual funds, making it easier for people to invest even in their busy schedules. But choosing the right SIP plan is equally important as there are different types of mutual funds available, ranging from equity, debt, hybrid to tax-saving funds, each with unique risk profiles and objectives.
Let’s simplify this complex decision-making process and learn smart ways to choose the right SIP plan for your financial goals in 2023. Starting from examining the fund benchmark, exploring historical returns, analysing the fund manager’s profile, and considering other critical factors that impact the performance of a mutual fund.
- Clearly define your financial goals
Your financial goals could be anything from buying a house, saving for retirement, planning your child’s education or their weddings. Once you know your financial goals, you can list down SIP plans and find one that aligns with your objectives. For example, if you are planning a big family vacation in five years, you can choose an SIP plan with a five-year horizon, offering returns that match your investment priorities.
- Analyse your risk profile
There are many factors that determine your risk profile like your age, income, expenses, debts, and financial responsibilities. A conservative investor who prioritises wealth preservation may consider investing in debt funds or hybrid funds, while an aggressive investor who seeks high returns may prefer equity mutual funds more.
Note that while higher risk involves higher returns, it also involves volatility and unpredictability. Therefore, it is advisable to create a diversified mutual fund portfolio and review it regularly to avoid high exposure to a single asset class.
- Compare different SIP plans
Analyse minimum 5-year performance track record, cost structure, and benchmark indices of each fund before making a decision. Reviewing its current market performance, net asset value (NAV), and exit loads is also important to understand the fund’s long-term growth potential.
- Read the fund related documents
The scheme documents offered by the fund contain detailed information about the scheme, including the investment strategy, past performance, asset allocation, fund manager, and cost structure. Analyse these carefully, as they give an insight into the fund’s investment philosophy, which can help you evaluate whether the plan fits your risk appetite and financial objectives.
- Use an SIP calculator
An SIP calculator is a financial tool that helps you understand your SIP returns at maturity with just three inputs; planned investment amount, expected returns, and tenure of investment. You can also experiment with different scenarios and adjust variables to see how they affect your final returns.
This way, you can understand which plan will benefit you the most for your short- or long-term goals and select the right SIP amount to invest regularly.
Investing is not just about saving money, but about making smart and strategic decisions. So, always do your research, stay updated with market trends, and consider other key factors to find the right SIP plan for your financial goals. You can also consult a financial advisor who can help you create an investing strategy and suggest best retirement plans as per your risk appetite and current financial position.