Why is it never late to start a mutual fund SIP?

There are several investment schemes in the market for the Indian investor to choose from. This may be considered as a curse or a boon, depending on the type of investor you are. For example, someone with in-depth knowledge about financial planning and investing may be able to make the most out of multiple investment options. However, those who are oblivious to investing and lack the knowledge of financial planning may find it difficult while making an investment decision. That's because the investment market is flooded with investment schemes that are almost similar in nature but vary in risk profile. The last thing you want is to invest in a scheme that is beyond your risk appetite.

This is why investors are always advised to be good at money management so that can be better at financial planning. When you know how to take care of your expenses and save at the same time, you may be able to chart out a better financial plan. Some people lack money management and hence have the bad habit of living from pay cheque to pay cheque. They first spend everything that they possibly could and only consider saving if anything is left after spending. However, someone who is good with financial planning might save first from their monthly income before spending it on other things.

The first step of financial planning is determining your short term and long term goals. When you have a defined set of goals, you know exactly what to achieve. And this may help you in making an informed investment decision using Mutual fund app. There are some investors who only wish to invest to save taxes, while others have long term goals like retirement planning. If you are someone who is seeking capital appreciation through investment in market linked schemes, you may consider investing in mutual funds.

What is a mutual fund?

In the recent past, mutual funds have gained traction among several Indian investors. Mutual funds offers investments options that consist of equity, debt, government bonds, corporate securities, call money, treasury bills, etc. What fund houses do is that they collect money from investors sharing a common investment objective and invest this pool of funds across the Indian economy. The money is invested in various money market instruments depending on the nature of the scheme.

Mutual fund investors are allotted mutual fund units in quantum with the investment amount and depending on the fund’s existing NAV. The performance of a mutual fund may depend on the performance of its underlying assets.

Mutual funds offer the option of SIP and lumpsum investment

If you want to make an investment in mutual funds, there are certain ways you can do that. Making a lumpsum payment is the most traditional way to invest in mutual funds. When you make a lumpsum investment, you pay the entire mutual fund investment amount right at the beginning of the investment cycle.

Systematic Investment Plan (SIP) on the other hand, is a new and unique way to invest in mutual funds. With SIP one can invest small amounts at regular intervals depending on their affordability. With SIP, all one needs to do is instruct his / her bank following which every month on a fixed date a predetermined amount is debited from your savings account and electronically transferred to the mutual fund. If you are a KYC compliant individual, you can invest in mutual funds via SIP even from the comfort of your laptop or smartphone.

Why is it never late to start a mutual fund SIP?

Although it is true that starting a SIP at an early stage in your life may help you reap many benefits out of your investment, here is why it is never late to start a mutual fund SIP:

The common phrase, “Better late than never” is quite apt when it comes to SIP investment. Even if you are 40 years old, or even 50 years for that matter, you may still consider a mutual fund investment via SIP. That’s because SIP investments tend to benefit from the power of compounding. So if you continue investing systematically in mutual funds through SIP for an investment horizon of at least 10 years, you still have a chance of building a decent corpus. Another good thing about SIP investments is that by making systematic investments at regular intervals, investors may benefit from rupee cost averaging. When the NAV of the fund is low, investors are allotted more units. Similarly, when the NAV on the fund is high, investors are allotted less units. This is referred to as rupee cost averaging and may benefit investors in the long run.

These are some of the reasons why it may never be late to start a mutual fund SIP. If you too are seeking long term capital appreciation through mutual fund investments, you may consider starting an SIP even at a later stage in your life.

Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.