How to select a SIP for long-term investment?

With everyday rising expenses saving a sum of money has become essential. The economic conditions…

With everyday rising expenses saving a sum of money has become essential. The economic conditions of the world after the pandemic struck, have shaken the financial system of the common people as well as giant companies. Even the inflation rate has made it difficult for people to save or invest a stipulated sum of money. Hence, the Systematic Investment Plan has made it easy for such people to save money. As a long-term investment, the money saved in SIP can be counted on.

What Is SIP?

A systematic Investment Plan is a mutual fund investment where people can invest a fixed amount of money at regular intervals. These intermissions can be once in a quarter or once in a month. The investment money is from INR 500 a month.

Ways To Select SIP For Long Term Investment:-

  • Target Long-term Goals And Tag SIP To The Same: When planning for making huge Investments like child education, the best possible way to make it is through Equity SIP. When the SIPs are related to Equity funds, they work the best and are meaningful. Tagging SIP amount with the target goals helps in maintaining discipline in the SIP investment and calculating it through the SIP calculator.
  • Quantitative Parameter: Mutual fund ratings, historical returns, interest rate scenario, expense ratio, exit load, average maturity, and analysis ratio are some of the quantitative factors which help in determining SIPs and mutual fund investments.
  • Decide Whether Direct Plan Or Regular Plan: The advisory support required is the main factor that helps in determining whether the Direct plan is better than the Regular plan or vice versa. In the case of a Direct plan, the distribution and trial fees are eradicated which lowers the total expense ratio and hence increases the returns.
  • Stick To The Fixed SIP amount: It is often seen that the investors consider increasing their SIP amount when the market scenario is good and lower the investment when the market rises. Such investment plans do not add up to the value and make it difficult to sustain. Hence it is important to stick to the stipulated amount decided for SIP investment. This amount can be calculated through a SIP calculator.
  • Make SIP Performance Specifications with Index: Investment in SIP benefits active fund management. For market sustenance, the Equity SIP should overpower the Index fund SIP by a stipulated margin regularly. Maintaining SIP Performance Specifications helps in assuring that the fund manager is not out of sync with reality.
  • Make A Conscious Selection of Funds For SIP: The Equity fund available in the market may all look equal. A selection of the right framework of funds helps in deciding the best SIP. The main factors that affect the choice of funds are the pedigree and AUM of the fund. Selection of funds where the fund management team changes repetitively may not be a wise decision. It can even lead to inconsistent investment. It is always smart to focus more on risk-return and less on absolute returns.
  • Equity SIPs for Long Term Equity SIPs are compounding in nature: In the case of Equity SIPs, the longer the SIP is maintained, the more benefits are enjoyed. Sustaining Equity SIPs for more than average time can bring down the cost of acquisition and enhance the returns.
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The Bottom Line

Investing through SIP can provide indispensable advantages. Setting up a target and considering the risk tolerance of the selected SIP can help in making the best choice. The money saved in the SIP investment plan helps in providing a secured future when considering making a huge amount of investment.