Mutual Funds are the flavor of the season. You just got to invest in them. Bank FD rates are falling and you just have to look to mutual funds to give you the returns you need. SBI has reduced home loan rates by 5 basis points to 8.3%, which it claims are the lowest in the industry. Car loan rates are being reduced from 8.75% to 8.7%. Other banks have also been cutting home loan interest rates.
While this is good for borrowers, it also means lower interest on bank FD's. With bank FD rates falling, you just have to look at mutual funds. The Government has realized this and has launched a popular campaign Mutual Funds Sahi Hai. Mutual Funds Sahi Hai dispels the myth that you must invest large sums of money in mutual funds to get rich. You can invest as little as Rs 500 a month through systematic investment plan or SIP.
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What is SIP?
Systematic Investment Plan popularly called SIP allows you to invest small sums of money regularly, say once each day, month or fortnight in a mutual fund. As Mutual Fund Sahi Hai says, you can invest just Rs 500 a month in mutual funds through SIP. Check out the IndianMoney.com Investment Calculator.
SEE ALSO: Mutual Funds To Invest Your Money.
You have the perpetual SIP where you don't have to choose an end date for the SIP. Once your financial goal is met, you just write to the fund house and ask them to stop the SIP.
You have the flexi SIP which allows you to change the amount you invest, whenever you want. You can choose to invest a higher/lower amount through flexi SIP depending on the money you have or the market conditions.
You can invest in mutual funds through Step-up SIPs where you increase the SIPs periodically. You can specify the amount and the frequency by which you want the amount to be increased. Step-up SIPs are very good if you want to start investing small amounts in mutual funds through SIPs. You then gradually increase the amount invested, as your income rises.
In an alert SIP, the fund house sends you an alert, when the stock markets are down by a few percentage points. If you are an informed investor, you can invest more money in mutual funds through SIP, when the stock markets are down.
SEE ALSO: Mutual Funds Sahi Hai
If you invest in mutual funds through SIP, you don't need to care if the stock markets are up or down. The money is automatically debited from your account and there's little effort on your part.
2. SIP helps you average purchase costs
With SIPs you can invest regularly and get more mutual fund units when the stock markets are down and less mutual fund units when the stock markets are up. This helps you average the purchase cost of your units.
3. SIP gives you the power of compounding
The power of compounding is often called the eighth wonder of the World. You simply invest in mutual funds via SIPs over long periods of time. You get returns on returns and your money starts compounding. You achieve long term financial goals with ease.
If you are keen to invest in mutual funds, do so via SIPs. This is the path to riches and wealth. Be Wise, Get Rich.
Mr. C S Sudheer is the founder and CEO of IndianMoney.com – India’s largest Financial Education Company. He started his career with ICICI Prudential Life Insurance and later on worked with Howden India. After his brief stint in Howden India, he moved on and incorporated Suvision Holdings Pvt Ltd which is the sole promoter of IndianMoney.com. He aims to build a nation that is financially literate with investment savvy citizens.
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