TOP 3 BENEFITS OF SIP IN MUTUAL FUNDS

 

Using a structured investment plan like SIP to invest in mutual funds has become quite popular. Continue reading to learn why mutual funds are such an excellent way to invest, along with the benefits of SIP to support your future financial goals.

Everyone has dreams, ambitions, and objectives they want to attain. For example, everyone wishes to be financially secure in their lives. For example, a new car, a bigger house, or a family vacation to an exotic location. However, you can only achieve your objectives if you put up the effort necessary to make them a reality.

Using a Systematic Investment Plan (SIP) to invest in mutual funds might be a straightforward solution to help you reach your objectives. So, let's look at what SIP stands for, how they operate, the benefits of SIP, and how your financial goals can seem attainable by investing in SIP

WHAT IS SIP?

A Systematic Investment Plan (or SIP) is a mutual fund investment that allows you to invest over time. It is a systematic way of regularly investing fixed amounts of funds, such as monthly, quarterly, or semi-annual. It may be simpler to reach your financial objectives if you invest consistently in this manner.

SIP in mutual funds is a monthly investment plan in which you invest a certain amount of money in a scheme of your choice. The money is automatically deducted from your bank account because of the setup.

HOW DOES SIP WORK?

A systematic investment plan (SIP) is a simple instrument that allows you to create wealth by making small, regular deposits over a longer time horizon. There are many benefits of SIP investment in mutual funds.

When you start SIP in a mutual fund scheme, you can buy a set number of fund units. You can invest in the fund at both highs and lows. You don't have to time the market to earn money. This element of uncertainty is removed with SIP investing.

You can select to automate your investments once you've chosen the investment term and frequency. Then, give your bank a standing instruction to transfer money from your bank account to the mutual fund SIP of your choice regularly (monthly, quarterly, etc.).

WHAT ARE THE BENEFITS OF SIP IN MUTUAL FUNDS?

MARKET VOLATILITY DOES NOT AFFECT THE INVESTMENTS

Markets reflect the economy, and just as the economy experiences ups and downs, so do the markets. So while a drop in the market might wipe out some of your gains, a SIP can make these dips work in your favor.

One of the advantages of SIP prevents investors from speculating in highly volatile markets. When the market is low, investors may buy more units, and they can buy a few units when the market is high. As a result, the long-term average cost of each unit is anticipated to be cheaper, while the investment returns are excellent.

Because you invest every month, the NAV of every scheme varies, and you receive a different amount of units each month. When the markets rise, the price will increase each month, and you will receive fewer units. When the cycle reverses and markets begin to decline, the purchase price drops, and you start to get more units for the same investment. Rupee Cost Averaging is the process of investing at different periods of the market to average out the costs.

HELPS TO BUILD CORPUS WITH SMALL AMOUNTS

Another benefit of SIP investment is that it allows you to invest in mutual funds with as little as Rs. 500 per month. So even if you don't have a lot of money, you may benefit from India's growth by investing in mutual funds.

This might be a cost-effective approach to invest each month without going over budget. With the SIP step-up function, you may raise your monthly investment amount as your income rises. In addition, investors can top up their SIPs regularly with mutual fund firms.

When you regularly invest in a mutual fund scheme through a systematic investment plan (SIP), your total investment amount rises to a sizable corpus over time. The benefit of compounding is one of the main reasons for your corpus's growth. Because mutual fund returns are reinvested, and you get returns on your returns, you profit from this simple yet powerful force known as compounding.

YOU BECOME MORE DISCIPLINED WITH YOUR SAVINGS

A well-known advantage of SIP investments is that it allows investors to have a disciplined approach towards savings. In addition, it instils some financial discipline in the form of a monthly budget. Because SIPs are very flexible, they may be stopped at any moment, and investors can choose to raise or reduce their investment amount.

You may follow the golden rule of personal finance by using SIP to save first and spend later. All you have to do now is choose a monthly SIP date that coincides with your salary date. And before you start spending, you'll wind up investing every month

BOTTOM LINE

There are many benefits of SIP investments in mutual funds apart from the top 3 mentioned here, like convenience, diversification, flexibility, no charges to start a SIP, etc. In addition, SIP defies the traditional belief that making money takes a lot of planning and work. In reality, SIP demonstrates that you must avoid any complicated investment methods such as market timing and instead invest regularly to manage your funds appropriately.

FREQUENTLY ASKED QUESTIONS

Can I Lose Money In SIP?

Yes, to an extent. As mutual funds are subject to market risks, an investor can lose some money as the fund houses invest in stocks, commodities, etc. But the most significant advantage of investing in mutual funds via SIP is staying invested for a long time and not letting the market’s ups and down bog you down.

Can I Withdraw SIP Anytime?

Most mutual fund schemes are open-ended and can be redeemed anytime. It mostly charge exit load of up to a year, after which there are no loads on investment redemption.

Which SIP is more beneficial?

There are many types of SIP- daily, monthly and quarterly. Depending on the risk tolerance and the amount of money available at your disposal for investment, you can choose a more suitable SIP option for yourself.

7 UNIVERSAL THUMB RULE FOR INVESTING

 

What is the thumb rule? A Thumb rule provides guidelines and assistance on doing or approaching a specific task. It offers a simplified set of rules or a course of action. From sports to cooking, thumb rules apply to everything. So, why should investing be an exception?

So, What Is the thumb rule to invest in mutual funds? First, a few investing rules might enable us to assess how quickly our money grows or loses value when investing. Then some rules guide us through our investment process. For example, how should we allocate our mutual fund assets, how much we should save for retirement and emergencies, etc.

We've compiled a list of general guidelines to keep in mind while making financial or investing decisions.

7 THUMB RULES FOR INVESTING

The first three thumb rules are essential to understand how to quickly appreciate the value of money.

RULE OF 72

We all want our money to double in value and are looking for strategies to achieve so in the quickest period possible. The rule of 72 determines the number of years it will take to double your investment.

If you divide 72 by the predicted rate of return, you may get a very accurate estimate of how long it will take your money to double using this approach. Let us understand this rule with the help of an example. Let's say you've invested Rs 1 lakh in a product with a 6 % return. When you divide 72 by 6, you get 12 as a result.

That implies in 12 years; your Rs 1 lakh will have grown to Rs 2 lakh.

It's vital to remember that this rule only applies to assets that pay compound interest.

You may also use the Rule of 72 to figure out how much interest you'll need to double your money in a certain amount of time. For example, if you want your investment to double in 5 years, to find out the interest rate, you have to divide 72 by doubling time to give you the interest rate. I.e., 72/5= 14.4%p.a. Therefore, to receive double the amount, you should receive 14.4% p.a

RULE OF 114

The 'rule of 72' informs you how long it will take to double your money, while this rule tells you how long it will take to triple your money.

Using the same logic and mathematical formula, the investing rules of 114 allow you to get a relatively accurate estimate of the number of years your investment can take to triple.

According to rule 114, if you invest 1 lakh with 6%p.a, it will grow to 3 lakhs in 19 years.

Similarly. If you want your investment to grow in 5 years. So, divide 114 by 5, which will give the interest rate of 22.8% p.a. To triple your money in 5 years.

RULE OF 144

The next thumb rule when investing in the mutual fund is rule 144. 72 multiplied by 2 is 144. As a result, the 'rule of 144' may easily be understood as a tool for calculating how many years your money will increase four times if you know the rate of return.

For example, according to Rule 144, if you invest Rs 1 lakh in a product with a 6% interest rate, it will grow to Rs 4 lakh in 24 years. So to figure the number of years it will take for the money to increase four times, just divide 144 by the product's interest rate.

100 MINUS AGE RULE

The 100-minus-age rule is a fantastic technique to figure out allocating one's assets. That is, how much of your money should go into equity funds and how much should go into debt.

According to this investment rule, you must deduct your age from 100. The result is the proportion of equity exposure that is suitable for you. The remaining funds can be used to invest in debt.

Suppose you are 25 years old and wish to invest Rs 10,000 every month, for example. The proportion of your equity allocation will be 100 – 25 = 75 percent if you follow the 100 minus age rules of investing. Then you should invest Rs 7,500 in shares and Rs 2,500 in debt. Similarly, if you are 35 years old and wish to invest Rs 10,000, your equity allocation would be 100 – 35 = 65 percent based on the same rule. That implies you should invest Rs 6,500 in shares and Rs 3,500 in debt.

MINIMUM 10% INVESTMENT RULE

According to this thumb rule, investors should begin by investing at least 10% of their current salary and raise it by 10% each year, as the salary package appreciates. It is best to take advantage of the power of compounding if you start investing early. Start young to reap the benefits of investing in the future. Online shopping and unnecessary expenses can wait.

EMERGENCY FUND RULE

Similar to the minimum 10% investment rules, you must contribute a portion of your salary towards the emergency fund. You must be financially prepared because you never know when life throws a curveball at you. Therefore, it is advised to set aside emergency funds before you begin investing. According to this guideline, you must set aside cash equal to at least 3-6 months' worth of monthly spending.

During a crisis, an emergency fund must be accessible, and it is best to keep it liquid to avoid any financial crunch.

4% WITHDRAWAL RULE

If you want your retirement fund to outlast you, stick to the 4% withdrawal thumb rule. If, as a retiree, you follow this guideline, you will have a regular income. But, at the same time, you have a sufficient bank balance to generate adequate profits.

For example, You have a retirement corpus of 1 crore, so according to the 4% withdrawal rule, you should take Rs. 4 lakh every year or Rs. 33,000 every month to survive through inflation.

SUMMING UP

The above-mentioned thumb rules for investing are general guidelines and principles that every investor should follow. Caution is the hallmark of a good investor, and you should do your homework and consult with an investment professional before getting started. That is why it is critical to emphasize that these guidelines should not be blindly followed. Note that a solid investment portfolio helps you achieve your financial goals while also considering your risk tolerance and time horizon.

FREQUENTLY ASKED QUESTIONS

What is the 5 percent rule in investing?

The five percent rule is an investment concept that states that investors should not put more than 5% of their portfolio money into a single fund.

What percentage should you invest in mutual funds?

The ideal amount that a salaried person should typically invest in mutual funds depends on several components namely expenditure and long term goals. The least you can implement is a 50:30:20 rule in your financial plan. The rule is extremely straightforward. It encourages you to divide your income in three parts:

• 50%- For your needs
• 30%- For your wants
• 20% -For saving and investing.

Therefore, one should invest a minimum of 20% of the salary in mutual funds investments through SIPs to build a sizeable corpus. And subsequently increase the percentage of SIP each year to add towards new goals and to beat inflation.

What are the three golden rules for investors?

The following are the most important golden rules for investors:

• To start early.
• To be consistent
• Take advice from your financial advisor.

चीन के रास्ते पर भारत, तेजी से बूढ़ा हो रहा

14 साल में 2.5 करोड़ युवा घट जाएंगे, बुजुर्ग आबादी 5% बढ़ जाएगी

भारत तेजी से बूढ़ा हो रहा है। 14 बरस बाद, यानी 2036 में हर 100 लोगों में से केवल 23 युवा बचेंगे, जबकि 15 लोग बुजुर्ग होंगे। मिनिस्ट्री ऑफ स्टैटिक्स एंड प्रोग्राम इंप्लिमेंटेशन की यूथ इन इंडिया 2022 की रिपोर्ट में यह अनुमान लगाया गया है। फिलहाल देश के हर 100 लोगों में से 27 युवा और 10 बुजुर्ग हैं|

सबसे पहले यह ग्राफिक देखिए...

2011 में भारत की आबादी 121.1 करोड़ थी। 2021 में136.3 करोड़ पहुंच गई। इसमें 27.3% आबादी युवाओं, यानी 15 से 29 साल की आयु वालों की है। इसके मुताबिक भारत दुनिया के सबसे युवा देशों में से एक है।

यूथ इन इंडिया 2022 की रिपोर्ट के मुताबिक, 2036 तक युवाओं की संख्या भी ढाई करोड़ कम हो जाएगी। फिलहाल देश में युवाओं की आबादी 37.14 करोड़ है। 2036 में घटकर यह 34.55 करोड़ हो जाएगी। देश में इन दिनों 10.1% बुजुर्ग हैं, जो 2036 तक बढ़कर 14.9% हो जाएंगे।

राज्यों की बात करें तो 2011 में युवा आबादी का पीक देखने को मिलता है और इसके बाद इसमें गिरावट शुरू होती है। हालांकि, केरल अपवाद है। केरल में पीक 1991 में ही देखने को मिल गया था। तमिलनाडु में भी 2001 की तुलना में 2011 में युवा आबादी में कमी आई और तब से लगातार गिरावट जारी है।

बिहार और UP में 2021 तक युवा आबादी काफी तेजी से बढ़ी है, लेकिन इसके बाद इसमें कमी आने लगी जो अब तक जारी है। देखा जाए तो आधे से ज्यादा युवा इन 5 राज्यों बिहार, UP, महाराष्ट्र, मध्य प्रदेश और राजस्थान में हैं।

2021 की जनसंख्या के मुताबिक, सबसे कम युवा आबादी वाले राज्य आंध्र प्रदेश, गुजरात, हिमाचल प्रदेश, कर्नाटक, केरल, महाराष्ट्र, ओडिशा, पंजाब, तमिलनाडु, तेलंगाना और पश्चिम बंगाल हैं।

वहीं लगभग सभी राज्यों में महिला आबादी का अनुपात युवाओं में पुरुष के अनुपात से कम है, लेकिन बुजुर्गों में महिला आबादी का अनुपात पुरुष के अनुपात से अधिक है। इस पैटर्न का प्रमुख कारण देश में महिलाओं की औसत आयु, यानी लाइफ एक्सपेक्टेंसी का ज्यादा होना है।

2011 से 2036 के बीच फर्टिलिटी रेट कम होने और औसत आयु बढ़ने से देश की डेमोग्राफी में बड़ा बदलाव देखने को मिलेगा। पिछले दशकों के दौरान सरकार ने भी कम उम्र में शादी करने और बच्चे पैदा करने से रोकने के लिए कई स्कीम्स मसलन- बेटी बचाओ बेटी पढ़ाओ, सुकन्या समृद्धि योजना, मुख्यमंत्री लाडली लॉन्च की। इसका रिजल्ट भी हमारे सामने है। लिटरेसी रेट बढ़ने से भी फर्टिलिटी रेट में कमी आई है।

सैंपल रजिस्ट्रेशन रिपोर्ट यानी SRS 2014-18 के अनुसार, भारत में जन्म के समय एवरेज लाइफ एक्सपेक्टेंसी 69.4 साल है। यानी ज्यादातर भारतीय 69 साल तक जीते हैं। गांव के लोगों में जहां यह 68 साल है, वहीं शहरी लोगों के लिए यह 72.6 साल है। भारत में महिलाओं की एवरेज लाइफ एक्सपेक्टेंसी 70.7 साल और पुरुषों की 68.2 साल है।

अब जानते हैं कि देश और लोगों पर इसका असर क्या होगा

रिपोर्ट कहती है कि भविष्य में बुजुर्गों की आबादी ज्यादा होगी। इससे बेहतर स्वास्थ्य सुविधाओं और बुजुर्ग लोगों के लिए वेलफेयर स्कीम्स की मांग पैदा होगी।

एक्सपर्ट भी कहते हैं कि बुजुर्गों की आबादी में बढ़ने से सोशल सिक्योरिटी का भी दबाव बढ़ेगा। यानी प्रति एक इंसान पर डिपेंडेंसी ज्यादा होगी। इसलिए सरकार को अगले 4 से 5 सालों में जॉब क्रिएशन में तेजी लानी होगी।

सामाजिक सुरक्षा के मामले में भारत दुनिया के दूसरे देशों से काफी पीछे है। यहां बुजुर्गों की देखभाल की संस्थागत व्यवस्था की कमी है। देश की 70% आबादी को ही किसी न किसी रूप में सामाजिक सुरक्षा हासिल है।

बुजुर्ग अगर आर्थिक रूप से किसी पर डिपेंडेंट नहीं होते तो उससे उनकी स्थिति अच्छी होने का पता चलता है। हालांकि, देश में सिर्फ 26.3% बुजुर्ग ही वित्तीय तौर पर किसी पर डिपेंडेंट नहीं हैं, जबकि 20.3% आंशिक तौर पर दूसरों पर डिपेंडेंट हैं। देश की 53.4% बुजुर्ग आबादी आर्थिक सुरक्षा के लिए पूरी तरह बच्चों पर डिपेंडेंट है। ऐसे में यह बोझ और बढ़ना तय है।