SIP investing 101: Tips to earn higher returns

Investing your money the right way can help you earn returns and fulfil different financial goals. However, investing is not a quick profit scheme where you just put your money into the stock market and hope it will grow. It is a strategic process which requires patience, active involvement, and a long-term mindset.  

Besides long-term approach, the discipline to stay invested even during the market’s downturns is what sets successful investors apart from others. And that’s where an SIP or Systematic Investment Plan can help. SIP helps you invest small amounts of money at regular intervals in different mutual fund investment plans. You can invest in equity, debt, hybrid, and even gold mutual funds as per your objectives and risk appetite. 

While SIP has its benefits, there are some smart ways to maximise your returns and achieve your goals faster. Let’s have a detailed look at these useful SIP strategies.

  • Select the right mutual fund scheme

There are different types of mutual funds with different risk-return profiles, portfolio holdings, and strategies. Before investing in any scheme, evaluate the fund based on parameters like past performance, fund manager’s experience, fund size, expense ratio, and other factors. 

To earn higher returns, choose a mutual fund scheme that suits your risk appetite and aligns with your investment goals. 

  • Step up your SIP

As your income grows or when you get bonus income, consider increasing your SIP investment amount on a periodic basis. This approach is known as step-up SIP. By gradually increasing your investment, you can allocate more funds towards your SIP and accelerate the growth of your portfolio through the power of compounding and rupee cost averaging. 

Before you step up your SIP, evaluate your current finances and set realistic targets so that you can comfortably manage higher SIP amounts.   

  • Diversify your investments with multiple SIPs

Instead of putting all your eggs in one basket, consider spreading your investments across multiple SIPs. Start one SIP in an equity fund to tap into the potential growth of stocks, another in a debt fund for stability and regular income, and yet another in gold funds to hedge against inflation. However, don’t forget to thoroughly research and check the portfolio holdings of each scheme. 

Diversification across different asset classes can help mitigate risks as you are not over relying on a single investment. This way, you can optimise your portfolio for long term returns

  • Control your emotions during market volatility

During market volatility, it is crucial to avoid impulsive reactions and emotion-based decisions. It’s natural for markets to experience fluctuations and reacting hastily may lead to missed opportunities and even losses. Instead, maintain a long-term perspective and stick to your investment strategy. 

Remember, SIPs are designed to average out the cost of investments over time. This means that during bear markets, you can purchase more units at lower prices, potentially maximising returns when markets recover. 

Ending notes

Investing in mutual funds through SIP can help you save for various financial goals, be it retirement planning, funding your child’s education, or building long term wealth. However, the key is to invest in an SIP wisely and take expert guidance from time to time to make strategic decisions. 

Also, invest regularly and increase the SIP amount when your income or finances improve. Monitor your portfolio performance actively and make necessary adjustments to ensure that your investments generate expected returns and stay aligned with your objectives. By combining the right strategies with professional guidance, you can maximise your SIP returns and work towards your financial goals.

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