6 Tips To Maximize Your Returns From Mutual Fund SIPs

Here are some ways by which we can really make our SIP investments more fruitful -

# Start Early

By starting early means here, to start saving and investing in your early age just like Warren Buffett, who start investing at the age of 11. That is when the compounding interest can work well for you. You must be thinking that you have already passed the age of 11, then it must be said that you better start now. The earlier you start investing, higher is the benefit that you can get with your investment over the period of time. At an early age, an investor can save more and invest accordingly as he/she has lesser financial responsibilities in comparison to the others in their 40’s. So start saving and investing today to maximize your returns from your SIP investment.

# And Never Think Of Holding Your Investment

That is not what an investor invests for, to never end his or her investment, right? Yes, but what the topic implicitly means is that when you start investing do not bind it in a short period of time. SIP returns do wonders when the investments are made for a long period of time without any breaks-in interruption. Investors invested in equity related schemes should not restrain themselves in short-term investing. Returns are maximized by staying invested for a longer period of time. Investment is a long and patient process and it is to be maintained rigorously in the same way to maximize SIP returns.

# Increase Your SIP Every Year

SIP is a disciplined investment plan where an investor invests some amount of his/her savings but, it nowhere means that an investor shall constraint himself or herself by investing a fixed amount only. It is always advised to increase or inflate your SIP investment as your salary or saving increases. Simply put, you need to take care of inflation. It gives a better return than the regular SIP due to the compounding effect on the increased amount invested. A variable SIP helps the investor to achieve their goal faster than the regular SIP, it also constrains the investor to spend more just and when he/she gets an increment. Your long-term fund requirement may also increase over the period due to inflation, which is why an investor must consider a step up in its SIP investment to be ahead from the inflation. 

# Volatility Is a Wonderful Thing, Embrace It

Equity Market is volatile and this is what makes the investors worried. The investor who thinks to invest when the market is low and divest when the market is at highs have his head up above the clouds from where the reality cannot be seen. A market cannot be timed or judged, which is why the SIP concept came into force to make a small investment in the market periodically to convert into a capital over the investment period of time. An investor shall not put an end to their SIP investments when the market comes down, instead he or she should not only keep their SIP investments running, but also do some top-up or lump sum investment to boost their returns. A correction in the market is the time when can be made as this is the time when the stocks are available at cheap price.

# Use SWP Instead Of Withdrawing In One Shot

Systematic Withdrawal Plan (SWP) is a tool provided by the fund houses to its unit-holder where one can withdraw a fixed pre-determined amount on a regular basis. The tool not only enables the investor to meet its regular needs, but also let her stay invested in the scheme for a longer period of time to enjoy the compounding benefit on the invested amount. The SWP is also a tax minimiser tool where no dividend distribution tax is required to be paid though the amount withdrawn is subjected to capital-gain tax if liable.

# See an Opportunity in Market Now, Start Lightening SIP

It is not possible to time the market, that’s true but, the market sometimes gives better opportunities to maximize the returns. If at the time investment has made, it would certainly give a boost to the returns over a longer period. This is what a lightening SIP does, if an investor finds a right opportunity to enter into the market and has an available lump sum amount, then he or she can make investments of a larger amount at that time and then start a SIP along with of a lower value to keep adding to the scheme. In brief, an investor can maximize SIP returns by sticking with right funds for a longer time, increasing its investment every year, Lightening SIP whenever the market gives an opportunity to invest at a cheaper valuation.