SIPs or Systematic Investment Plans allow an investor to save money on a regular basis which accumulates over a period of time. One can withdraw their invested amount after maturity or can reinvest again, whatever suits individual needs. Such regular investment plans are perfect for those who cannot invest a lump sum amount as it gives the flexibility to save money in parts that doesn’t pinch the pockets, especially to the ones who are salaried and have limited resources for investment. According to findings, only 2% of Indian investors prefer investing in equities and mutual funds as the majority of them are unaware of its benefits and the results that it can yield over a period of time. SIPs in mutual funds are one of the best investment options for anyone wanting to enter into the market, although there are risks involved like any other investment plans, this is a slightly better option because one averages the buying price by investing regularly.
The Power Of Systematic Investment Plans (SIP):
You can choose to invest in SIPs on a monthly, weekly or yearly basis and there’s an option of automated withdrawal from your bank account at regular intervals. According to industry experts investing in SIPs is always a better idea as it does not burden you with financial pressure, moreover, it also helps you average out the buying price or NAV.
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29 April 2025
How to Select the Perfect SIP Plan That can Give Good Returns Over a Period of 5 Years?
There are numerous methods through which you can check which funds are best suited for you. The best way is to set a goal & horizon for your investments and select a fund best suited to that.
Given below are some important points which one should keep in mind while selecting a particular SIP with an investment period of 5 years in mind:
- Identify the goal you are investing for and set a horizon for it. For eg. If you want to buy a SUV after 5 years, the investment goal is the SUV’s price and the horizon in this case is 5 years.
- Understand the level of risk you are comfortable with and identify the best suited investment category. All types of Equity funds (Large Cap or Small Cap) come with high risk and are only suitable for a horizon of 4-5 years. Investors who are not comfortable with high risk should look for dafer options like Hybrid Funds or even debt funds.
- Look for funds that have consistently outperformed other funds in the category in terms of last 1,3 5,10 year returns. Other things to look for- Expense ratio, Exit Load, Lock In, Fund Manager’s track record, AUM etc.
- Calculate how much you need to invest per month based on expected returns and goal value.
There are various tools available in the market like the SIP Return Calculator which helps you figure out the returns SIP investments would yield after staying invested for a specific duration. You can use ET Money’s SIP Calculator to check out the projected returns of investment on your SIPs.
