Things to remember before starting SIP Investments


Systematic Investment Plans or SIPs have become extremely popular among Indian investors for investing in mutual funds. By investing small fixed amounts regularly, SIPs help you build a sizeable corpus over the long term. However, there are some things you must keep in mind before starting SIP investments. Read on to find out.

Define financial goals

Outline what you aim to achieve from your SIP investment. Do you need a retirement corpus, child’s education fund or money to buy a house? Defining financial goals will determine the mutual fund schemes you should invest in, investment timeframe and risk appetite.

Commit adequate monthly amount

Decide a monthly SIP amount that you can spare consistently without affecting your living expenses. Avoid extremely high or low SIP amounts. Also factor in future income growth and how SIP amount can be increased gradually.

Choose the right fund

Select an appropriate mutual fund scheme aligned to your goals after evaluating historical returns, portfolio holdings, fund management team and other aspects. Have a mix of equity and debt funds.

Long term approach

SIP allows you to invest across market ups and downs. Don’t expect extraordinary returns in the short term. Focus on long term compounding and growth over 5–10-year periods. Avoid discontinuing SIPs during market falls.

Costs and charges

Check for expense ratio, exit load and other costs before investing as high costs reduce your overall returns. Opt for direct plans over regular plans to save on commissions.

Frequency and date

You can opt for monthly or quarterly SIP instalments on a fixed date. Set the date just after your paycheck is received to plan SIP investments. Alter date if it clashes with major expenses.

Use autopay facility

Opt for Electronic Clearing Service or auto-debit to avoid missing SIP payments. However, ensure sufficient account balance availability on SIP date.

Increase SIP amount

Raise your SIP amount by 10-20% every year depending on income growth to beat inflation and get higher returns through the power of compounding.

Rebalancing and monitoring

Review your mutual fund portfolio every 6 months. Redeem non-performing schemes and invest gains in better performing funds to rebalance occasionally.

Don’t time the market

Once you start an SIP, stay invested for the long haul instead of timing market movements. SIPs average out cost and help invest across market cycles systematically.

Risks involved

Equity exposure means your portfolio will be vulnerable to market corrections and volatility. Stagger your SIPs across equity and debt to balance risks and returns.

Debt reduction

If you have high cost loans or credit card dues, clear them first before starting SIPs. The interest cost on debt is higher than SIP returns.

Retirement planning

Use SIP calculator tools online to estimate the corpus you will generate towards retirement. Make SIPs part of your overall retirement planning strategy.

Child future planning

Use SIPs to build a sizeable education fund for your kids. You can consider child ULIPs and dedicated children’s mutual fund schemes.

Financial advisor

If you are unsure about how to plan your SIPs, take professional help from a qualified investment advisor or financial planner.

Regular portfolio review

Review your overall asset allocation across equity, debt, gold etc. every year to check if your SIPs are on track to achieve financial targets.

By keeping these essential things in mind, you can make your SIP journey more disciplined, focused and rewarding. SIPs work best when done in a meticulous and consistent manner over the long term to accumulate wealth. Stay committed to your SIPs through ups and downs of financial markets.