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Best SIP investment can help you meet your long term goals

Updated on January 30, 2018

Investing in mutual funds through Systematic Investment Plans (SIP) is one of the best investment options for retail investors. Most retail investors are salaried persons and the primary source of income for such investors is their monthly salaries. SIP can help you invest your regular monthly savings in a disciplined and convenient way. Investing at a regular frequency has several advantages.

  • Savings not regularly invested tend to get spent on discretionary items which usually have no future financial value or very little financial value. By investing a portion of your savings into best SIP investments, you can grow your assets.
  • Savings lying idle in your savings bank account is not productive. By investing money regularly, you can put it to a productive use and benefit in the long term from the power of compounding.
  • Equity markets are volatile. Simple logic dictates that we invest when prices are low. However, it is impossible to determine if prices are at their lowest. By investing on a regular basis in best SIP investment, you can make market timing irrelevant because you will be buying at different price points. This is also known as rupee cost averaging. Rupee cost averaging will give your superior returns in the future.

Mutual funds are one of the best investment options for retail investors. Through mutual funds you can achieve risk diversification and leverage the benefits of an expert fund manager looking after your investment. Mutual funds also offer a wide array of product choices to meet your specific investment requirements.

Selecting the best mutual fund schemes

Since there are many mutual fund products out there in the market, investors can often get confused about which product to invest. You should understand the product characteristics (e.g. equity, debt, hybrid, capital appreciation, income etc.) and select a product class that is suitable for your needs. Within each product class, you will fund many mutual fund schemes. You should select mutual fund schemes whose fund managers have a long track record of strong performance. Performance consistency should be an important parameter for selecting the best SIP investment plan. Mutual fund research firms like CRISIL, Value Research and Morningstar provide rankings and star ratings for various mutual funds schemes. You can refer to these rankings or ratings for identifying best performing funds.

SIPs for long term goals

The power of compounding of mutual fund SIPs can produce astonishing results over a long investment horizon. For example a contribution of monthly Rs 5,000 in best SIP investment can grow in value to around Rs 14 lakhs over a 10 year period, assuming an annualized return of 15%. Over a 15 year investment horizon, the investment value of the SIP can grow to over Rs 33 lakhs (assuming 15% returns). Over a 20 year investment period, the value of the SIP can grow to almost Rs 75 lakhs. Observe that the corpus grows exponentially over time. This is due to the power of compounding. Over a 25 year investment period, the value of Rs 5000 monthly SIP can grow to over Rs 1.6 Crores (assuming 15% returns) and over a 30 year period you can accumulate almost Rs 3.5 Crores.

You can see that investing a relatively small amount every month from your monthly savings in a best SIP investment of mutual funds, investors can accumulate a substantial corpus over a long investment period, to meet various long term investment goals like property purchase, children’s education, children’s marriage, retirement planning and wealth creation. Let us assume you are 30 years old. If you invest Rs 5,000 every month from your monthly savings you can accumulate nearly Rs 3.5 Crores by the time you retire at the age of 60.

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