It appears that we are finally beginning to catch up with the mutual funds. The mutual fund AUM increased dramatically from 2002 to 2023, from 1.01 trillion to 39.42 trillion, with a CAGR of about 20.76% (AMFI, 2023). Advertising efforts like “Mutual Funds Sahi Hai” have raised awareness of the value and advantages of investing in mutual funds.
Mutual fund SIPs have also become a well-liked investment method. The importance of SIPs cannot be understated given the advantages of rupee-cost averaging and the power of compounding. The mutual fund SIP book increased during the course of the last 7 years, from 2017 to 2023, from Rs. 4,050 crore (AMFI, February 2017) to Rs. 13,686 crore (AMFI, February 2023), expanding once more at an amazing CAGR of over 22%.
The historical returns that SIPs have provided are another factor contributing to their rising popularity. According to an internal analysis conducted by NJ Wealth, the average returns provided by SIP in the 11 funds that were active during the 25-year period delivered close to 16.61% annualised returns. One of the primary expectations of investors from SIPs over the long-term investment horizon is generally strong returns. The CEO of NJ Wealth Financial Products Distribution Network, Misbah Baxamusa, is the authority on all you need to know.
Thus, the question of how many investors have actually taken advantage of this and continued their SIP journey for extended periods of time emerges. To ensure that we gain the most from SIPs, as investors, we must consider how we may use them to our advantage. Let’s look at several approaches to how we may approach achieving the same.
Invest for the long term – Your SIP investments require direction to produce the best outcomes, just like a cricket match requires a smart strategy to win. A defined purpose can be developed and a clear roadmap for achieving these objectives can be created by coordinating investments with financial objectives. Making SIPs meaningful and connecting them to long-term requirements may result in a shift in strategy and a long-term commitment.
Consistency and discipline – The cornerstones of any successful investment strategy are consistent and disciplined investments. SIP naturally contains these components. At the end of the SIP term, people may, nevertheless, have a tendency to pause, quit, or not renew the SIP. Additionally, people have a propensity to frequently make unnecessary redemptions. Avoiding all of this is advised. To avoid frequent redemptions, consider solutions like loans against mutual funds.
Giving the SIP schemes enough time to operate is another thing to think about. It is not a good idea to chase top performers blindly. Instead, investors should take the time to analyse their needs and, with the aid of a mutual fund distributor, match them with the appropriate category of mutual funds.
Once your SIPs are in place, there should be a clear portfolio review procedure that happens on a regular basis. The goal is to assess whether the investments are in keeping with the specified needs, look at the overall asset allocation, and perform other tasks. Keep in mind that a scheme’s success should be assessed over the long run, and ideally, short-term performance shouldn’t be used as the only criterion for selecting a plan. Changes to the portfolio at the scheme level should only be made when necessary, if the scheme is appropriate, and after a comprehensive assessment of the scheme and the fund house.
Increasing your SIP investments on a regular basis – Top-up SIPs are the key to better wealth accumulation. Investors can increase their SIP investments as a proportion of their wages or at least equivalent to the inflation rate with the rise in disposable income to accelerate wealth accumulation.
In conclusion, maximising profits using SIPs necessitates a disciplined and patient approach. To match investments with long-term financial needs and risk profiles, investors can consult an advisor or a mutual fund distributor. They can take use of the guidance provided by specialists to adopt the proper investing mindset and follow the recommended investing practises. Achieving greater performance and keeping any gains you have made requires avoiding emotional biases, irrational behaviour, and expensive blunders. This method of investing, which extends beyond SIPs, can help investors get closer to achieving their goals in a straightforward but efficient way. After all, it is harder to have a straightforward proposal that is taken seriously, yet this is what it takes to succeed.
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