The Ultimate Guide to Choosing the Best SIP Plans for a 1-Year Investment
If financial stability and stable wealth accumulation are your monetary goals, choosing a Systematic Investment Plan is one of the best ways to start. Systematic Investment Plan or SIP is a method of investment that facilitates the investor to allocate a specific amount of their capital to Mutual Funds or ULIPs, at pre-decided dates, debited directly from their bank account. While browsing through the best sip plans for 1year investments may not be a conventional savings plan for many, it is one of the best investment alternatives in the market at present.
With the current state of the economy, fund management institutions also provide investors with a viable means to cushion their capital against inflation while building a large corpus over time. Choosing the best SIP investment plan is imperative to secure your finances based on your goals.
If you’re wondering how you can invest in the right SIP plan for a year, this article can help you in making the best decision.
How to choose the best SIP plan for a 1-year investment?
- Write down your goals: What do you wish to do with this sum of money upon maturity? Determine your financial needs and make note of your investment objective.
- Calculate the investment amount: Chart and calculate the amount you need to save to meet these financial goals. Based on your earnings and savings plan, arrive at an appropriate figure you can create for the SIP instalments.
- Educate yourself: Gather extensive knowledge about the SIP you wish to invest in. Study the top-performing ULIP plans and mutual funds.
- Documentation requirements: Collect and submit all the required documents for KYC to streamline your investment process without any interruptions.
- Historical Returns and Ratings: Before choosing a SIP plan that suits your financial goals, check the historical returns as they provide a benchmark to forecast future returns. You must consider checking for the ratings provided by various credit rating agencies. Additionally, use a SIP calculator to get an idea of your projected returns.
- Get expert help: When in doubt, reach out to investment experts to enjoy the best SIP plans for a 1-year investment plan hassle-free.
Things to keep in mind before investing in a SIP plan
- Fund Credibility: Make sure that the mutual fund you’re choosing has been actively progressing in the market for five years and over.
- Verify the plan: Double-check that the mutual fund you prefer is operated by your primary bank. When in doubt, reach out to your relationship manager and verify the particulars of the plan before investing to avoid fraud or bad investments.
- Reputation: The “fund house” chosen by you must be reputable and recognisable. In most cases, if your fund house is reputable, it ensures good performance and the returns provided by it.
- Fund Size: Make sure that the total size of the asset that you’re investing a SIP in is huge. The value speaks of the number of investors and the reliability based on the fund size.
- CRISIL Rating: Funds that are ranked in the top three by CRISIL are the ideal choice for a SIP investment.
What are the benefits of investing in a 1-year SIP plan?
- Small investments lead to greater returns: One of the most substantial benefits of investing in a SIP is compounding. By investing at regular intervals, your corpus gets the opportunity to grow at a compounded rate. In contrast, investing a lump-sum may not reap the same benefit as a SIP as it blocks a substantial chunk of your capital in one go. SIP investment growth is exponential; the longer you invest, the greater your returns.
- Averaging of Rupee Cost: Rupee cost averaging is a simple concept where you buy more units when the price is low and lesser units when the price increases. In the long term, we observe the cost of investment averaging out. Investors don’t have to worry about timing their investments with market fluctuations while investing in a SIP.
- Run multiple SIPs at once: Since SIPs require you to invest a small chunk of a large corpus at predetermined intervals, it still leaves you the capital to invest in multiple SIPs. If you were to block your corpus in one big investment, you wouldn’t be able to enjoy a diversified portfolio with a variety of risk tolerance and varied returns.
- Enjoy financial flexibility: Investors can start or stop their SIP plans at any point in time, which gives them the benefit of flexible liquidity.
- Save up for impending big expenses: One-year SIPs are a great way to save up for an upcoming spending event.
Confused between ULIP and Mutual Funds?
SIPs are available in ULIP and Mutual Funds but could confuse many people.
ULIP is the best SIP plan for you if:
- You’re looking for a medium to long-term investment plan.
- You wish to secure your family while building a corpus.
- You are keen on a low to medium risk tolerance.
- You wish to experience lesser market volatility.
- You want to save on taxes through investments.
Mutual funds are the right SIP for you if:
- You’re looking for a short to medium-term investment plan.
- You only want to focus on building your corpus.
- You can take a medium to a high amount of risk.
- You have experience in dealing with high market volatility.
- You wish to prioritise liquidity over tax savings.
A SIP plan through Mutual Funds or ULIPs for one year is the perfect way to gather funds for specific expenditures at a later date without hurting your finances. Those with an additional income might like to invest in periodic intervals to make a purchase later or save for the future. The interest income earned is a surplus that can help your capital keep up with the time value of money.
You may research more about SIPs and invest in the Best SIP Investment Plan to start saving up while practising better financial planning!