Four things you must consider while investing in SIPs

Starting an SIP? Here are 4 things you should know first

After PM Modi’s demonetization move, some people have been confused with their investments. Is it a good time to keep investing or redeem the current investments and wait for a while?
This type of confusion can be cleared if you are investing through the Systematic Investment Planning route. Because with SIP, you do not have to worry about the market’s ups and downs.

The SIP culture is gaining ground because of this reason, but SIP has a lot more into it. SIPs are a powerful tool indeed, but it is extremely important to keep expectations clear and understand how they work.
Here are four things you must consider while investing in SIPs –

SIPs need management as well

One prevalent misunderstanding is that SIPs don’t need to be managed since a long-term view is taken. One should check if the basic principles of the investments still hold true, on a periodical basis. For instance, over time the investments process or style may change, which need to be reviewed like other investments.

SIP is a method of investing; not a product

SIPs help in bringing a disciplined approach to investing. They are not a separate product category. You can use this approach to invest in equity mutual funds.

Expense ratio

Expense ratio is the percentage of basic overall expenses of a mutual fund company, over the total investments on mutual funds. In other words it is the charge that a customer pays to get investments managed by Asset Management Companies. It varies with each company and asset category. Compare the expense ratios before investing in a mutual fund.

Asset allocation

Choosing the asset class, such as liquid funds, equity funds and debt funds, is known as asset allocation. The amount of investment in each category will define the value of your future corpus. Liquid or debt funds are ideal for short term goals, equity funds are more suitable for a time horizon above 5 years. Similarly equity funds are ideal if you have a higher risk appetite.

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