SIP investment plans are the most commonly used mutual fund plans when it comes to building long-term wealth for retirement. Before we talk about 5 tips to accelerate your financial growth with SIPs, it is very important to understand clearly what an SIP really is. SIP is just a “mechanism” to invest your monthly recurring savings into mutual funds. But it is NOT the only mechanism and definitely not the best mechanism.
Opt for direct mutual funds
This is perhaps the simplest one to implement. Direct funds will straightway give a boost of 0.8%-1% (annually) to your returns.
Start early with your SIP investment plan
This is very important. If you are looking to build a retirement corpus with your mutual fund investments, starting early is extremely important.
The earlier you start, the more time you give your investments to compound. And compounding is simply awesome. You can’t imagine what it can do for your wealth creation.
Compounding basically means investing back the returns generated by an investment. This return generated is added back to the principal and then the investment generates further returns on the enhanced principal. This is a very powerful concept and can over time turn even small sums into very large sums of money.
Select the best mutual funds for your SIP investment plan
This sounds almost like common sense. And it is. If you select the best mutual funds, you will get the best returns.
But the harsh truth is that most people get it wrong. They think that they are opting for the best mutual funds. But they are not.
Keep your portfolio optimized
The funds you select will not be the best funds forever. Make sure that you are always invested in the best mutual funds.
For example, suppose you select the best mutual funds as per the list above. Fast forward to year 2023. Do you think that the same funds will still be the best then? If not, why should you continue investing in them?
Portfolio optimization is fairly complex to implement. You have to actively manage your portfolio. Unless you have all the time in the world, better left for the machines.
Best for the last!
By applying intelligence to your SIP investment plan (and now we will start to call it something different), you can give a significant boost to your returns.
Intelligence can be the real game changer for your investments.
Also Read: Why should you buy mutual funds?