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Steps To Know Before Investing In SIP

Individuals opt for systematic investment plans with an aim to build a wealth corpus or with the intention to enjoy a few more tax exemptions.
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  • 03 Feb 2023
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Some investors invest in mutual funds with an aim of accumulating money, without any specific goal assigned to it. Follow these 6 steps may come in handy before you start your investment in a systematic investment plan.

Step 1: Define Your Goal

Have a goal in mind before you begin your investment in this plan. Whether it is to fund your education or buy a home. It could be a safe keep for your retirement years or to buy a big car. Identify these goals, and you will have a clearer picture of the investment plan that you will best suit your needs.

Step 2: Determine The Value Of Investment Required

Your goals will give you an idea about the amount of money you will need. You can attach a value to the goal by referring to the current cost of that commodity. The next step is to identify its future cost as in the price of that commodity in the year that you are planning to buy it. These two values will give you the value of the instalment you will have to put in.

Step 3: Prepare A Finance Schedule

Identify whether you will need this money in the next 2 years, 5 years or 10 years. This means you have to identify whether your goal will be achieved through a short-term, mid-term, or long-term mutual fund investment.

Step 4: Identify The Investments

Identify the right asset class that will help you reach your goal in the decided time frame. If you want high returns in a short time period, then you will have to look at schemes with a high-risk factor like liquid funds, since the risk is directly proportional to returns.

Step 5: Choose The Right Scheme

Choose the right scheme to help you fulfil your goals. You can accomplish this by conducting your own research or visit an asset management company or fund house. Depending on your goals and time frame, they will able to determine what mutual fund scheme would be the best fit.

Step 6: Monitor Regularly

Regularly monitor the performance of the fund in which you have invested your money. If you have invested for the short term, it will be essential to keep a close tab on your scheme; however, if you have invested for the long term, then you must monitor your scheme at regular intervals to remain updated about your scheme’s performance.

Also Read:

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Are SIP Tax free?

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