Investors who are able to build serious wealth do two things very well:

First, they identify the best investment options that can get them to protect their capital and build serious wealth over a period of time.

Second, they make sure that a fraction of their monthly income goes to the investment option of their choice.

We’re sure you’re wondering:

“What’s the best investment instrument can both protect your wealth and help you build some serious wealth at the same time?”

The answer is pretty simple: SIP!

Yeah! You heard it right! SIP is the perhaps the best investment instrument that can help you invest a fixed amount of money at regular intervals, minimize your investment risks, and help you build a sizeable corpus wealth over a period of time.

Quite expectedly, SIP investments have gained popularity over the years. In fact, a report by Economic Times reveals that new SIP registrations went up 92% in Financial Year 2017-18.

But here’s a brutal truth about SIP investments:

Only a handful of SIP investors are actually to make profits and create sizeable wealth over the tenure of their investment. Others end up just blowing their hard-earned money and getting disappointed.

Wondering how to invest in SIP to ensure maximum profits and achieve your wealth creation goals?

Well, today we’re going to make it easy for you. All you need to do is carve out a few minutes of your day and get acquainted with these 5 thumb rules of SIP investments.

 

Rule #1: Understand That SIPs Are No Shortcut to Creating Wealth

SIP investment has everything on offer for an investor– Wealth Creation, Capital Protection and Disciplined Investment.

But there’s just one problem: SIPs do not offer a fixed amount of interest or a constant return on investment. In fact, many-a-times you’ll find your SIPs making significant losses – and vice versa.

That’s why it makes sense to understand and accept the fact that SIP investments are no shortcut to creating wealth. Instead, it takes patience and disciplined investing to make the most of your SIP investments.

Rule #2: Stay Invested for a Longer Period

Let’s face it: the stock market is unpredictable and often volatile. This means those investing in SIPs for short terms have more chances of running into losses. In fact, experts suggest that short-term SIP investments often prove to be futile.

Therefore, it makes sense to invest in SIPs just because the markets are looking good and stable. Instead, you should look at a minimum timeframe of 5-10 years when planning to invest in equity SIPs.

Remember, only when stay invested in SIPs for a longer timeframe, the power of compounding and Rupee-cost averaging will help you multiply your wealth manifolds. So make it a point to invest your hard-earned money in SIPs for a longer period of time.

Rule #3: Diversify Your Investment Portfolio

With all the talk about smart investing and asset protection, it’s easy to forget about an important aspect of SIP investments – Portfolio Diversification.

Here’s why it’s important to diversify your portfolio:

Portfolio diversification helps you smartly invest your hard-earned money into different funds minimizing the risk. So when one of your chosen funds isn’t performing well, you can still count on others. Most experts too suggest on splitting the investment and diversifying the portfolio.

Putting all your money in just one mutual fund option puts you at a greater risk. Therefore, it makes sense to invest your money into different mutual fund options in order to protect the investment capital, minimize the risk and maximize the returns.

Rule #4: Choose Your Funds Wisely

Now that you know that diversification of investment portfolio is important to minimize risks and maximize returns, it is time to choose your fund options.

Remember your choice of mutual fund options will spell the difference between success and failure of your investment in terms of creating a sizeable corpus. So it makes sense to choose a mutual fund option after carefully analysing at least 4 to 5 years of its past performance.

Even the most seasoned investors make the mistake of selecting mutual fund options basis just one year of their past performance. Here it is important to remember that a well performing mutual fund option in the last year may have a long history of under-performance. And that’s the reason why it makes sense to identify and choose mutual fund options on the basis of at least 4 to 5 years of market performance.

Choosing a wider timeframe when researching about mutual fund options will show you a clearer picture of the intended fund’s ability to perform when the market is volatile and unstable.

Once you have found the best mutual fund options to invest in, keep an eye on their market performance. Replace the non-performing mutual fund options with well-performing ones regularly and so on.

Rule #5: Invest with a Purpose

There’s no denying it: investment without a proper planning and purpose doesn’t yield the desired result.

This means you’ll need to link your SIP investment plan with tangible, quantifiable and important life goals! Before you start your investment, make a list of goals that you wish to achieve with your investment corpus.

Linking your SIP investment with tangible life goals will help you invest in a disciplined manner, keep you interested in long-term SIP investments, and will finally help you meet your life goals!

Remember, when you’ll attribute a real, tangible result to the aim of your investment, you’re more likely to work towards achieving your investment goals rather than investing blindly without an objective in hand.

Here’s The Next Step…

So there you have it – 5 thumb rules of SIP investments. If you too have been planning to start SIP investments, go ahead, put the learning into practice and see your money grow manifolds.

Do you questions about something you’ve read? Leave a quick comment and we’ll be around to answer your questions right now!