Small investments big returns with mutual funds

Byshaheen shaikh

Mutual funds- an introduction

From the name itself, you can understand that in mutual funds, there is not one single investment account with a sole owner. This is a kind of financial market where several investors come together and invest their capitals in a pool. These capitals are then transferred into funds and stored in stocks, bonds, or forex markets. The unit price of the funds is dependent on the trade markets and the factors responsible for causing price movements. So, yes, mutual funds are volatile,, and that’s what makes them profitable, provided you are choosing a proper investment plan for yourself.

What is SIP?

Over the years, mutual funds have become quite popular. It is for this reason many investors are looking for different plans with different attributes. Since an investment always requires huge capital, the mutual fund market introduced the SIP plans. 

SIP or Systematic Investment Plan allows the investors to deposit small amounts of capital at negotiated intervals in the same mutual fund scheme. So, here, one wouldn’t have to deposit huge capital at the beginning only. As you will go on making the small investments, your capital will increase and, in turn, the profits.

What are the types of SIP plans?

If you are looking forward to investing in mutual funds, choosing SIP will definitely bring a lot of fortune. But, for that, you need to understand the types of SIP in the Indian market.

Flexible SIP: Here, you will be able to change the amount of investment you are dropping every interval as per the market conditions and your finances.

Step-up SIP: Step-up SIP: Here, you will be able to increase the investment capital every interval at a certain percentage. It is highly profitable as, over the period, you have a huge investment. 

Perpetual SIP: in this, the investors can leave out the end date of the investment plan, thereby ensuring that they can liquidate the assets at any point in time.

Trigger SIP: here, you can mention some specific triggers like a fixed withdrawal at a certain point of time or increase the investment after a couple of intervals.

How is SIP beneficial for investors?

Since now you have learned about what is SIP, it’s time to know more about the advantages of this particular investment plan in the mutual fund market.

  • Here, you will be able to liquidate the assets at any point in time if your financial conditions are dwindling and you need immediate money.
  • The market risks can be mitigated with small investments and hence, you can avoid the losses.
  • If you can’t pay the investment in one interval, you will have the provision to skip that payment and continue with the next one.
  • Multiple SIPs can be started simultaneously if you want to distribute your funds to diversify the risks.
  • SIP will allow you to invest in a systemic manner which will give you more returns.

Even though several speculations are there about the SIP investments, you can take help from experts to know more about this investment plan. SIP will allow you to get higher returns at lower capitals easily with no hassle.