Taking the SIP route to invest in Mutual Funds may be ideal but contrary to popular belief, it doesn’t cost much. In fact, you can start with as low as Rs. 500. Let’s find out how.
Investing in Mutual Funds through a Systematic Investment Plan (SIP) is probably one of the best ways to invest in Mutual Funds. In fact, this is Mutual Funds basics, some would say. How, you ask? Taking the SIP route comes with several advantages:
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SIP = Saving on auto pilot mode
For starters, it instills a sense of financial discipline in you. Your monthly SIP payments ensure forced savings and is not influenced by your whim and fancy to save. Every month based on your directive to the bank, a pre-decided amount moves from your bank to the fund.
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Market timings aren’t your headache
Secondly, investing through SIP means not having to worry about market timings. With small amounts being invested every month, your investments can tide over market vagaries and reduce its impact on your returns. Lump sum investments, if not timed well, can actually end up in huge losses for investors. Moreover, buying a large number of units when markets are going south can negatively impact your returns.
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Rupee cost averaging never looked this good!
SIPs come with this magic trait called ‘rupee cost averaging’. When you invest through a lump sum, if not timed well, your investment can buy you a large number of units if markets are cheap and small number of units if markets are expensive at the point. SIPs throw this uncertainty out of the equation. Through rupee cost averaging that comes with fixed investments every month, SIPs will average your cost of investment. Unless you’re a pro at investing and keep a track of the markets routinely, there’s probably no better way to invest in Mutual Funds than through SIPs.
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Now that you know why financial experts vote in favour of SIPs, here’s some more news that will make you squeal with joy – you can start investing in SIPs with amounts as low as Rs. 500. Sounds too good to be true? Here’s proof: we’ve shortlisted 5 SIP schemes that let you invest in them with only Rs. 500 and yet offer promising returns:
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Aditya Birla Sun Life Tax Relief 96:
One of the oldest tax-saving funds in India, it was launched in 1996. By investing in the scheme, a deduction of Rs 1,50,000 can be claimed under section 80C. It has been giving stellar returns in excess of 24% over a five year period.
Source: The Economic Times; returns reported as of 31 Aug’2018
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Reliance Tax Saver Fund:
This scheme aims to generate long-term capital appreciation from a portfolio that is invested predominantly in equity and equity-related products. By investing in the scheme, a deduction of Rs 1,50,000 can be claimed under section 80C. The scheme has been generating returns in excess of 23% p.a. over a five year period (as of 31 Aug’2018).
Source: The Economic Times; returns reported as of 31 Aug’2018
Additional Reading: Best Equity Mutual Funds To Buy In 2018
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SBI Bluechip Fund:
This fund aims for long-term growth in capital through active management of investments in a diversified basket of large-cap equity stocks. Some of its top 10 holdings are in companies like HDFC Bank, L&T, ITC, Mahindra and Mahindra Ltd. etc.
Source: The Economic Times; returns reported as of 31 Aug’2018
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Reliance Small Cap Fund:
This scheme invests predominantly in equity and equity-related instruments of small-cap companies. Its top 10 holdings are in companies like Zydus Wellness, VIP Industries, Deepak Nitrite, RBL Bank etc. The scheme also has a Systematic Withdrawal Plan (SWP) option available and has been generating stellar returns in excess of 38% p.a. over a five year period (as of 31 Aug’2018).
Source: The Economic Times; returns reported as of 31 Aug’2018
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L&T Midcap Fund:
The fund’s objective is to generate capital appreciation by investing primarily in midcap stocks. The fund carries an exit load of 1% on redemption within 365 days and lies in the below-average risk grade. It has given returns of 31% p.a. over a five year period (as of 31 Aug’2018).
Source: The Economic Times; returns reported as of 31 Aug’2018
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See, how easy that was? Also, to clear the air – it is possible to get stellar returns from investments if you invest as low as Rs. 500. However, one of the salient things to remember about Mutual Fund investing is to keep stepping up your investments year after year. For instance, windfall gains like a spike in your income, bonus, arrears etc. should help you increase your investment amount gradually. Even when you get them in the form of a lump sum, try and invest it over a period of, say, 6 months or a year.
Additional Reading: Still Confused About SIP Investment? A Guide To Help You Sail Through
We have a bunch of Mutual Fund schemes that will help you get started with your SIP debut. Take a look?