Key considerations for new investors in SIPs to maximise returns

Key considerations for new investors in SIPs to maximise returns


As a new investor, the decision to invest in mutual funds through systematic investment plans is a great way to build your financial portfolio. With SIPs, you can invest in manageable instalments that suit your financial capacity and achieve your different goals while still fulfilling your other responsibilities.

SIPs provide many other benefits, such as rupee cost averaging, flexible tenure, an option to automate contributions, and access to mutual funds even with limited earnings. The best part is that it helps you stay disciplined and regular with your investments.

However, for new SIP investors, it is important to focus on several crucial aspects to make calculative and realistic decisions. You must choose the right SIP mutual fund, set your objectives or goals, and create a well-thought-out investment plan based on research and analysis.

Let’s go through all the key considerations for new investors in SIPs in detail:

  • List down your goals

Ask yourself what you want to achieve with your SIP investments. Are you saving for a down payment on a house, funding your child’s education, or building a retirement corpus? Clear goals will give your SIP strategy a purpose and help you focus on the bigger picture.

Be specific and realistic with your goals. Avoid overly ambitious targets like “becoming rich” or “making a lot of money.” Focus on objectives that you genuinely want to achieve.

  • Invest in multiple SIP.

Do not invest all your money in a single SIP plan. Initiate multiple SIPs to achieve different goals. Suppose you have two financial goals: building a retirement fund (30-year timeframe) and saving for a vacation (5-year time frame).

Since you have a 30-year timeframe to create a retirement corpus, you can afford to take more risks in your investments. You can invest in equity-oriented mutual funds such as ELSS (Equity Linked Savings Scheme) funds and allocate a major portion of your income to aggressive investments.

Since your vacation goal has only a 5-year timeframe, you may choose debt-oriented or hybrid mutual funds that offer more stability and are less affected by market volatility. These funds can better preserve your capital, helping you save more and earn returns for your vacation.

Thus, having different SIPs for different goals ensures that each investment aligns precisely with its objective.

  • Avoid frequent changes

Resist the urge to make frequent changes to your SIP investments based on short-term market movements. Trying to time the market can be risky and may harm your long-term gains.

When there is a sudden market downturn, and your SIP investments experience a temporary dip, you may think it is right to stop or withdraw SIPs to prevent losses. However, markets are unpredictable, and they often recover over time. Thus, it’s best to stay patient and avoid making emotional decisions, giving your portfolio a chance to recover and grow.

  • Increase SIP amounts with income growth

As your income increases over time, consider increasing your SIP investments proportionally. Allocating a higher percentage of your earnings to SIPs can accelerate your portfolio’s growth and put your surplus money to work.

Suppose your salary increased by 15%. You can decide to increase your SIP contributions by 10% via step-up SIP. This way, you leverage the power of compounding on a larger sum, which can lead to greater wealth accumulation in the long term.

  • Monitor and review periodically

While avoiding frequent changes is crucial, you should periodically review your portfolio. Check if your chosen mutual fund schemes are performing as expected and if they still align with your financial goals. If needed, make adjustments thoughtfully. This practice is important to make sure that your SIPs continue to serve their purpose.

Wrapping up

SIPs can be a great investment tool for new investors to generate wealth and fulfil various financial goals. But to maximise SIP returns, it is important to be patient and disciplined with your investments and follow the thought-out strategies mentioned above.

Most importantly, educate yourself on market trends, understand the fund expenses, and avoid making emotion-based decisions. For added support and a personalised approach, it would be wise to seek the insights of a financial advisor.

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