Wealth creation may seem overwhelming when you’re just starting out. However, with time and knowledge, we learn to make the right choices that facilitate the same. In fact, the best choice you can make is to start investing. Starting a Systematic Investment Plan (SIP) can be fruitful in many ways, and if done right, few years down the line, you could feel financially confident.
Of course, as a beginner, you feel so confused with so many investment options, and then end up not going ahead with any of those. It’s like walking into a store full of pretty dresses and wanting to buy them all, but since you can’t, you walk out with nothing. When overwhelmed with choice, start small and take the help of a professional or an expert who can guide you correctly. Wealth creation is no joke after all.
We spoke to Sai Bhosale, a Chartered Accountant and financial advisor who simplified SIPs for us. To begin with, she explained what SIP is. “It is an investment option offered by Mutual Funds where one can invest a fixed amount in a Mutual Fund scheme at regular intervals, say once a month or once a quarter, instead of making a lump-sum investment,” Bhosale explained.
If you’re keen on knowing everything about where to begin and how to do it right, read on…
Why Investing in SIP is a wise choice
With an ocean of investment options, one may wonder why SIP is a wise choice. Bhosale revealed that it, as a matter of fact, helps diversify your portfolio and thereby reduces the risk of losing your money at the same time. “An investor can diversify the portfolio, ensuring all the eggs are not in the same basket and is less likely to lose money on all investments at the same time,” Bhosale explained.
In fact, SIPs promote investment discipline and help build wealth faster “as investors do not have to pay taxes on unrealised income each year. Taxes have to be paid only on redemption of funds,” Bhosale pointed out.
Why you should start young (but it’s never too late)
Great results require time and as with many other things, wealth creation too should be started early. “Wealth creation process is a long term process and if one starts early, one is in a better position to meet one’s financial goals. With the benefit of compounding, by staying invested for a long period, wealth accumulated over the years will be much higher,” Bhosale explained. “Also, at a young age, since financial responsibilities are less and risk appetite is more, one has a good amount of time to recover from any financial mistakes made at a young age,” she further added.
In fact, since one can start investing in SIPs with an amount as small as ₹500, even young individuals who are just starting out in their careers can afford to do so. Bhosale also explained that with professional expertise, starting a SIP can be relatively a secure choice. “Mutual funds are professionally managed, and hence, investing is done with adequate research and based on prudent investment processes,” she said. However, it’s never too late and you can start investing at any age.
Tips on starting SIP for beginners
Bhosale shared expert insights on how to start a SIP as a beginner. Use the following tips to start building wealth effectively.
· The mantra for beginners should be to start early and invest regularly.
· Also, beginners can avoid common financial mistakes by consulting a financial advisor. It is a wise step if one has a busy schedule or lacks financial knowledge.
· The right advisor, who understands the financial needs and goals, helps one create and protect wealth. The benefit of different investment avenues and different asset categories can be availed by choosing the right financial advisor.
· Right asset allocation helps to achieve the goals faster. (Strategic Asset allocation, Tactical asset allocation and Rebalancing).
Best SIPs in 2021
Bhosale listed the best SIPs to invest in 2021.
· Axis Bluechip Fund
· Axis Focused 25 Fund
· DSP Equity Fund
· Franklin India Focused Equity Fund
· HDFC Balanced Advantage Fund
· ICICI Prudential Bluechip Fund
· Kotak Standard Multicap Fund
· Motilal Oswal Focused 25 Fund
· Nippon India large Cap Fund
· Tata India Consumer Fund
Also Read: 5 Reasons You Need An Emergency Fund And How To Build It
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