Wealth Guide: Mutual Funds - We all want to invest and grow wealth but struggle to really find the best avenue. There are many investment options available in the market like Fixed Deposits (FD), Mutual Funds, Direct Equity, and post office saving schemes which can easily twist a new investor's mind and tumble into the canyon of uncertainties and perplexities.

COMMERCIAL BREAK
SCROLL TO CONTINUE READING

Among all these SIPs in equity mutual funds are disciplined, simple, and cost-effective options for one to invest and grow wealth. Anurag Garg, Founder and CEO, Nivesh.com, shares his knowledge on how to how to earn higher returns through Mutual Funds and 3 things SIP investors must keep in mind:-

1 - Setting up of Investment goals

“SIPs in mutual funds are designed to serve all types of investment goals. Therefore, always keep a goal in mind before investing. A goal can be a short-term goal or a long-term goal and can vary from person to person. SIP works best for a long-term investment because due to the power of compounding one can generate more wealth in the long run and this can help accomplish their goals,” says Anurag Garg.

2- Patience is the key

Explaining why patience is the key to successful investing and the longer you stay invested, the better it is, Garg suggests, “The returns generated on your invested amount further earn a return in the subsequent period. One should also be aware that the longer the period, the better the SIP benefits. Let's, understand this with an example:

If you invest ₹5,000 monthly, here’s the magic that time can add:

 

 

The above illustration is assuming an average return of 9% pa during the investment period. The example clearly shows that the expected earning roughly doubled up the investment amount over a period of 15 years. Therefore, it is advisable to stay invested for as long as you can. “

3-Can start even with small amounts

Advising why there is no need to have a huge surplus to start a SIP, Garg said, “One can start investing through small amounts, you can grab the benefits of SIP with as low as Rs. 100 and for best results do a top-up every year and keep increasing the amount. This will be easy to manage as well as there will not be any burden on your shoulders and helps you in achieving your goals faster. “

4 - Suggesting time can never be perfect but your SIPs can be, he says, "We have been hearing from a lot of investors that - I will start investing when markets go down - There is no perfect time. The market that seems higher to you today could prove to be profitable a few years down as SIPs offer an advantage of rupee cost averaging. This means you automatically buy more units when the prices are low. Thus, market volatility works in favor of SIP investments in the longer term and the returns get magnified. Therefore, do not wait and start as early as possible as Rome wasn't built in a day."

5 - Garg says, "Track your investments and diversify your portfolio." 

"If you are regularly reviewing the enactment of your funds, you can take reasonable actions to guarantee that your investments are going in the right direction.Also, diversify your portfolio as much as possible. This will enhance the performance of the funds by lowering the risks that SIP may have and hence, maximize the returns. We are no more in that era where one is only earning to satisfy the essential needs of life like Roti, Kapda, and Makaan. Investments have got into the new list of bare essentials. Volatility in recent years has stretched the tolerance of every investor. Thus, do your research, ask relevant questions, and only then make a decision. Don't panic during unfavorable market circumstances," 

"Observing the above points will go a long way in ensuring that you have a thriving investment journey that obliges you throughout your life with the triumph of your financial pursuits," Garg concluded.

(Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)