You do not need a lot of money in your bank account to start investing. Any amount that you could save monthly can help you achieve your financial goals. It is the power of regular investment and a long-term outlook that makes an impact. A monthly SIP can be a good option to start with for many investors who are looking to go the investment route without committing a big amount right at the beginning.
Can A Small SIP Make a Difference?
Now imagine instead of investing ₹500 per month into your discretionary purchases, you decide to squirrel away some money for your retirement. If you invest ₹500 every month, that's ₹6,000 per year. After ten years, you'll have saved a neat ₹60,000.
Not bad. But the thing is, if you were to invest this money in a mutual fund scheme, it'd provide you with market-linked returns. And these returns may earn you some additional returns in the form of compounding interest.
For example, a ₹500 monthly SIP over ten years with 10% annual returns, compounded monthly.
Particulars | Estimated Amount |
Monthly investment | ₹500 |
Investment period | 10 years |
Total contribution | ₹60,000 |
Estimated investment value | ₹1.03 lakh |
Estimated gains | ₹43,000 |
Why Does Consistency Matter More Than Starting Big?
Many people tend to think they need to have a decent income before getting into investing. However, all you need is something that you can consistently contribute to the investment corpus.
Let us say you start with ₹500 per month and increase it to ₹1,000 or ₹2,000 when you get a raise. This way, you will not have to make any sudden changes to your budget.
The key idea is to keep a corpus that you can consistently contribute without touching the money that you set aside for rent, electricity, family expenses, and emergency needs.
You should also be rational about the amount you decide to invest. A small SIP will not turn into a large corpus overnight. The tenure of your investment, the amount that you invest every month, and the returns generated will decide the final amount that you will have to retire with.
How Can a Calculator Help You Plan?
Being unclear about your future investment amount may make it challenging to achieve your financial goals. The SIP calculator app allows you to enter your monthly instalment amount, period of investment, and projected gains to determine how much you will make from the investment.
For instance, it will be feasible to compare the results of a monthly installment of 500 for a period of ten years and then another one for fifteen years. You can also increase the monthly amount and compare the results.
It will, therefore, be easy to align the investment plan with your needs and objectives to meet your lifestyle and financial needs in the future. Examples include having extra funds for further studies, vacation, or retirement.
It is essential to try different values when estimating the potential of an investment scheme instead of guessing a specific amount. The sip calculator tool enables you to input the assumed values to compare and estimate your future gains.
Choosing The Right Mutual Fund for Your SIP
The calculator will help you arrive at a possible corpus. Choosing the right investment needs a little more research on your part.
A mutual fund app can help you explore the various schemes available and help you track your investments. Before you invest, study the investment objective, risk level, expense ratio, and investment horizon of the fund. The equity funds are recommended for long-term goals and investors with a higher risk appetite. Debt funds carry a different risk and have different investment horizons. Understand what risk level you are comfortable with and choose a scheme with similar risk.
Common Mistakes to Avoid
Though starting small is a good strategy, it's important that you understand that you shouldn't expect to benefit by investing a small amount of money every month. Mutual funds may dip, especially in the short term.
Don't stop your SIP just because the market corrects itself, without first analysing your needs and predicaments. On the other hand, don't keep investing just because you've started, even if your financial situation keeps changing.
Keep track of your SIPs and only increase instalments if you have the extra money lying around. A SIP calculator app can help you do this and should be used at periodic intervals to check if you're on course to meet your financial goals.
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Conclusion
A SIP may help you generate returns, if only you have the time and patience. Use a mutual fund application to monitor the amount you are investing and what you stand to gain and remember that there are no assured profits in the stock market. You should start small and only increase your investment when you are confident that you can afford it. If you do this, you will always be on your way to making your dreams come true financially.
