How many millionaires do you know who have become wealthy by investing in savings account? I rest my case. – Robert G. Allen
After reading the above quote, didn’t you just had a second thought about the money you have kept in your savings account? We understand the concern because investing in a savings account is the first choice of many. In the present scenario, top banks like State Bank of India (SBI) and Axis Bank have reduced the interest on a savings account to 3.50% per annum. In the case of Fixed Deposits also, the maximum interest rate at present is 6.75% per annum (in general) that the maximum rate is available for the tenure of 1 year only. Now, what are you left with? Where should you invest or are you planning not to do it? Let us remind you the famous quote by Benjamin Franklin, “A penny saved is a penny earned.” So, if you are not saving, you are actually in loss! It is now the time when you must check other options like the mutual fund SIP. Read more to know about it in detail.
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When is the right time to invest in SIP?
We have a good news for you, there is no such thing as the perfect age or the ideal time to start saving for your future. The sooner you start, the better return you will get. There is no age criteria for SIP investment because all you need to have is the KYC documents and a bank account. So, irrespective of the type of funds, if you start at a young age and maintain a disciplined investment pattern, the returns can be amazing.
Where should you invest in SIP?
Even though there are no restrictions when it comes to choosing the best mutual fund, it is always advisable to do a proper research and put your money at a place that can give you a higher return in a long run. You can start with debt funds as they act as emergency funds and can be withdrawn easily. After 2-3 years, you can switch to equity funds especially if you are planning for long-term investment.
Why invest in Mutual Fund SIP?
As the name suggests, this is a systematic way towards investment and starts with as low as ₹500 which is within the reach of the masses. A systematic platform like SIP (Systematic Investment Plan) is a great option to start multiplying your money. Let us suppose you have just started your professional life and are looking for the best place to invest. Where will you invest? The decision, of course, lies in your hands and depends on the factors that are important for an investor.
Benefits of investing in Mutual Fund SIP
Have a look at the benefits of investing in SIP:
- Systematic Investment Plan (SIP)- As the name suggests, you can do the investment in a disciplined and systematic way for a chosen time period
- You can start the investment with the minimum amount of ₹500
- There is no TDS (Tax Deduction at Source) on Debt funds
- You get returns in the form of capital gain and dividends
How to earn through Mutual Fund SIP?
If you start investing 20-30% of your salary, it is expected that you can make your first million even before you get married that is in general before you turn 30. To reach that level, start investing in mutual fund SIP with ₹5,000 if your monthly salary is ₹25,000. Here is the plan that you can follow to make ₹10 lakhs with the minimum investment of ₹5,000 per month.
- Invest ₹5,000 in a good short-term debt fund (Debt funds has no TDS)
- Increase the amount by 10% annually for two years
- Now invest in equity funds and don’t forget to increase the amount by 10% annually
- Follow this pattern and you will make ₹10 lakhs in just 8 years!
It is advisable to take the help of an expert fund manager who can guide you in choosing the fund.
Investment Mantra for youngsters
Youngsters have the opportunity to invest more as they have no major financial responsibilities. But, they still have to take care of their own expenses. So, if you want to really succeed in life is to follow the below mantra:
Income – Savings = Expenses
The above equation has brought the difference between a successful person and an ordinary one. So, the first thing you should do after you get your salary is the investment, and then use the remaining for your expenditure.
Disclaimer – Mutual Funds are subject to market risks. Please read the scheme related documents carefully before investing.