Systematic Investment Plan or SIP.
by Madhurima Tiwari MBA FinTech Manager
One of the most common methods of growing your wealth is through a Systematic Investment Plan or SIP. As the name suggests, an SIP means saving small sums of money over a period of time, which ultimately results in you ending up with quite a large corpus. An SIP is one of the most convenient investment vehicles that lets you accumulate a considerable amount of wealth in the long run.
SIPs & Market Fluctuations
It is always advisable that you invest in equities in the long term. Equity funds perform the best when there is a long-term timeline along with a proper target amount. However, the market is meant to be volatile and market fluctuations are a part of the investment journey. You should never cancel your SIP during periods of market correction since it can have a negative effect on your investment. While planning your SIPs, you should have a somewhat flexible timeline that lets you accommodate for market fluctuations. During the ups and downs of the market, remain patient instead of cancelling your Systematic Investment Plan.
Review your SIP Performance
Investing in an SIP is one of the first steps of your investment journey. Therefore, you need to monitor the investment from time to time, to ensure that your long-term goals are in sync with your SIP.
It is important for you to review your SIPs to help you understand which of your mutual fund schemes have performed according to your expectations and which haven’t. If you find that one of your schemes has been underperforming for the last 18-24 months, you may choose to exit the scheme.
Furthermore, if you monitor your SIPs periodically, you also get an idea of how to rebalance your portfolio depending on your asset allocation.
You can invest in an SIP at any point in your life, but it is advisable to start investing as early as possible. Investing early ensures that you get the chance to accumulate a higher corpus, and have a high wealth ratio. Even if you have a lower contribution margin, provided you start early, you have the chance to maximise your returns through the power of compounding. The power of compounding ensures that your principal
earns returns, and your returns earn returns. The earlier you invest, the more time you leave for your principal to compound.
Madhurima Tiwari MBA