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How to get a good return on your equity mutual funds SIPs?

Systematic Invest Plans (SIP) are simple to maintain and over an extended period, and can deliver great returns. Plus, there are ways to obtain a much steadier performance and build wealth at the same time using SIP. Here are some such tools that will make you more productive the SIP way.

Everyone wants to get the most out of individual investments and always desires investment instruments that offer good liquidity, capital appreciation, returns, tax efficiency, and the like. 

Yet, one cannot guarantee the market conditions, social, and geopolitical changes in the country. Keeping these in mind, Equity Mutual Funds, especially via SIPs, become an instrument of choice for long term investing. 

Systematic Invest Plans (SIP) are simple to maintain and over an extended period, and can deliver great returns. Plus, there are ways to obtain a much steadier performance and build wealth at the same time using SIP. Here are some such tools that will make you more productive the SIP way.

Early is good 

Getting investing lessons right, especially earlier in life certainly helps. A systematic approach to investing at an early age will help one build a good corpus with lesser money over a longer term. 

For instance, one can make a corpus of Rs 1 Crore in 40 years at 10 percent per annum by investing just a little bit less than 2000 rupees per month via the Equity mutual fund SIP route when one is 20 years old. 

However, to raise the same amount at the age of 40, one will have to invest about Rs.14000 per month. The idea is that one has fewer responsibilities when one is young, so the risk is more evenly spread with longer duration SIPs. 

Markets and the economy are rarely in steady state modes. They will have highs and lows. Government policies across the world will evolve continuously. One should not stop investing during the lows. 

Try to ignore volatility

Markets and the economy are rarely in steady state modes. They will have highs and lows. Government policies across the world will evolve continuously. One should not stop investing during the lows

In fact, down cycles can add to investor wealth immensely. In SIP, you end up getting more units when the market is moving south. To get the most out of equity MFs, cultivate patience and continue investing as usual during these periods as well. One has a higher probability of earning a better return when one doesn’t focus on every market movement and be invested for at least seven years.  

Use multiple routes 

For someone who has started investing at the age of 20, it is easier to invest more often using the SIP route considering additional disposable income and no responsibilities at least till one gets married or is in a situation where one has more existing obligations. 

In such cases, it is advisable to create parallel goals to ensure that the current investments are not affected. In short, have a financial plan, and invest according to goals. For short term goals, invest in debt MFs. For the long term, make sure you choose equity, and invest at the same time for different corpuses, like retirement or your child’s higher education.

Step up

As one continues to create new goals and adjusts returns against inflation, it is also essential to increase the initial investment amount to meet the costs. So, every annual hike at the workplace should ideally also give an individual portfolio a hike by the consecutive percentage amount too. This will help your investments grow better. 

Do not withdraw lump sum

Unless it is a planned requirement or a contingency, do not withdraw a lump sum from your portfolio. Only withdraw as per your actual needs. 

Apply these ideas to your SIP and watch your wealth grow the way you have always wanted.

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