Let’s try to understand mutual fund SIPs as simply as possible.
If there is one investment option that is broadly advertised, it is mutual funds. With hundreds of mutual funds available to choose from, by well-known companies like Kotak, Mirae Assets, Aditya Birla Sunlife and more, they are fast becoming a highly sought after investment option. They suit the mindsets of different kinds of investors, from those who want low-risk investments to those who want high-risk ones. You can invest in equity, debt, short term, ultra short term, ELSS (tax saving) or diversified mutual funds, as per your needs. You can choose funds investing in large cap, mid cap, small cap, a mixture of two or a mixture of all three, depending upon your financial goals.
Mutual Funds work on the concept of ‘NAV’ or Net Asset Value. It is often advised to keep in mind the value of compounding in mutual funds and let your money be for at least three-five years. This gives great return and is the best way to grow your money.
There are two ways to invest in mutual funds, you can either invest as a lump sum or start a SIP. Starting a SIP, is a better way to go. A SIP gives you the chance to average the NAV of your mutual funds’ investment. The NAV of a mutual fund investment is based on the stock markets. A SIP can help average your NAV value if you have invested during the bull phase of the market and are incurring a loss at the moment. It is a great investment option. It can also add discipline to your investment routine.
Do you have a SIP already?