The millennial generation is facing a lot of challenges, starting from career and wealth creation, to hunting for an investment option that offers better yields. In such a scenario, SIP investment is becoming a popular choice for the retail investors. The statistics reveal that the Indian SIP market industry has grown by 13 times in the last 10 years.
Thanks to demonetization drive and increased awareness among the small-town investors, the growth in SIP investment has increased to 1.7 crore in October from 68 lakhs from three years ago.
Why go for SIP investment route?
The primary reason why people invest in SIP is that it allows retail investors to enter the equity market with discipline and lower risks. Also, it offers rupee-cost averaging benefit. With volatile market conditions, most investors become sceptical where to invest and where not to; hence, SIP investment offers the solution for it.
Apart from that, it offers flexibility in the sense that your investment or ticket size can be as low as Rs. 500 per month. Here’s a quick guide that will help you to know a little more about the SIP investment
- Make investment according to your own convenience– SIP investment lets the investors to start and stop investments at their own will. It can be daily, monthly, quarterly, and bi-annually. The investors can choose the frequency that suits them the best.
- Decide the risk appetite– It is important to start an investment plan early in your life. However, it is advisable to think about the goals and time horizon before selecting the scheme. If you have a long-term horizon, you should invest in the equity schemes through SIP. Select a portfolio depending on your risk-taking capability and the amount that you can pay.
- Check the schemes carefully– Various schemes are launched by the government to increase the exposure of retail investors towards the equity market; the recent one is the diamond SIP. Yes, this scheme is for Indians who find their love in diamonds. The Indian Commodity Exchange has recently got a nod from SEBI to start with first ever diamond SIP scheme for the retail buyers to acquire this stone. Then there are certain schemes that help the students to aid their education. So, it is important to check the schemes carefully and align it with your investment goal.
- Don’t stop investing once you have started- We have written a lot about increasing the number of retail inflows in SIP, but at the same time there is a certain category of investors who feel concerned about investing their money especially when the market is at the all-time high. It is advised not to quit the schemes, but wait till the market noise is over. The returns depend upon how investors treat the SIP.
- Regular SIP- Investor starts SIP for a particular time period to invest in a disciplined way to build a large corpus.
- Stop when it is high- In such an SIP, the returns are better than regular or traditional SIP, but the final corpus is lower than it.
- Stop when low- It offers the lowest returns because the SIP is stopped when the market turns bullish.
In the end, we would like to conclude that though the regular SIP offers better returns, the investor should not follow, “fill it, shut it, and forget it approach.”