7 Quick Tips to Choose the Best SIP Plan
A systematic Investment Plan (SIP) helps you to invest regularly and gives you benefits like deciding investment amount and rupee cost averaging. However, even in SIP, you have a choice to invest. SIP allows you to invest systematically.
Now there are trading apps available that allow you to trade online in the stock market. Appreciate offers an app that allows you to start an SIP online and invest regularly weekly, monthly or quarterly.
SIP investment | Image Resource: appreciatewealth.com
Investing tips
If you are planning for a child’s education or retirement then it is best to invest in equity SIP. The SIP designed around the equity fund works the best. For SIPs to work best you should tie them up with financial goals you want to achieve. This gives you a purpose to invest and instill discipline in your SIP investment.
Depending on your financial goals and time horizon you should invest in equity, debt or liquid funds. For short-term goals, liquid or liquid plus funds are the best. For long-term goals (above 7 years) equity funds and multi-cap funds are the best.
You can invest in regular or direct plans depending on the amount of support you need from advisors. For direct plans, you need not pay the distribution and trial fees. Therefore, the total expense ratio is lower by 100-125 basis points thus giving higher returns.
In long-term investments, you can benefit from the power of compounding. The longer you invest the more the benefit of rupee cost averaging. This will bring down the cost of acquisition and the returns will be enhanced.
All the equity funds are not equal and you should use the right framework to select funds for SIP. You should not invest in funds where the management team changes frequently as it leads to an inconsistent fund policy. You should focus more on consistency of returns and risk-adjusted returns.
Investors think that they should increase the SIP amount when the markets do right and reduce it when the market goes up. This will lead to trying to time the market which is difficult and will not add any value.
When you invest in SIP you get the advantage of active fund management. Your equity SIP should perform better than the index fund SIP by a good margin on a sustained basis. You should check with the peer group to make sure that your fund manager is in sync with investing that helps you achieve your goals.