Factors to Consider While Starting SIP
Planning to start a SIP? Here are some important points to be considered before starting:
1. Financial Goals: Understand your vision in life to set Financial goals and then accordingly pick up the SIP plans with appropriate investment amounts that will eventually help you to accomplish your goal. You can start with a small amount and increase gradually with time.
2. Investment Horizon: Investment horizon means the span of time you are willing to stay invested. This helps in deciding the tenure of your SIP. In order to enjoy the advantages of compounding, it is often recommended to invest for a longer duration.
3. Risk Appetite: Before getting into any SIP plan, it is important to measure the degree of risk you are willing to take and then choose a mutual fund scheme that matches your risk appetite. Equity funds are generally riskier than debt funds.
4. Investment Frequency: Investment frequency means the intervals of investment for say monthly, quarterly, or yearly. You are free to choose the investment frequency depending on your income and expenses, job security, and so on.
5. Portfolio Diversification: It is never a good idea to invest in a single fund. Always diversify your investments in different securities across different industries. Portfolio diversification spread the risk across different asset classes.