One of the best features about investing in mutual funds is that you don’t need a large amount of money to start investing. Most fund houses in the country allow investors to begin investing with as little as Rs. 500 (some start at Rs. 100) per month through Systematic Investment Plans (SIPs). Now, this might seem like a tiny amount to begin your investment journey, but when you invest consistently over a considerable period, you can achieve a substantial sum.
SIP is a method of investing in mutual funds where you invest a specific amount at fixed intervals. This way, you can avoid timing the market and increase your wealth steadily.
Here’s an example to illustrate the SIP point:
Let’s imagine you invest Rs. 5,000 per month in an equity fund for 15 years. The fund offers an annual return of 12%. At the end of the investment period, you would have amassed a corpus of over Rs. 25 lakh. Now, if you continue investing the same amount for another ten years (total 25 years), you would get a total sum of almost Rs.95 lakh! This is roughly four times the amount in an additional ten years.
This is the power of compounding. The returns you earn in turn begin to make profits for you. So, when you invest for a longer time frame, your gains also rise higher. But to gain the maximum benefit of compounding, you should start investing as early as possible and invest for as long as possible. This can give you an extended investment window to increase your returns.
How to invest in mutual funds
These days, investing in mutual funds has become effortless. You can even do it right from your home. Here are the steps you can follow to begin your investment journey:
- Sign up for a mutual fund account on franklintempletonindia.com
- Complete your KYC formalities (if you have not yet done so)
- Enter the necessary details as required
- Identify the funds you wish to invest based on your financial goals
- Select the fund and transfer the required amount
- You can also create a standing instruction with your bank in case you invest in a SIP each month.
Final thoughts
Investing in mutual funds is one of the simplest ways to achieve your financial goals on time. But before you invest, take an adequate amount of time to go through the different fund options. Don’t invest in a fund because your colleague or friend has invested in it. Identify your goals and invest accordingly. If required, you can approach a financial advisor to help you make the right investment decisions and plan your financial journey.
Note: SIP should not be construed as promise on minimum returns and/or safeguard of capital. SIP does not assure any protection against losses in declining market conditions.