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How to Choose the Best SIP Plans

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SIP or Systematic Investment Plan is considered one of the most perplexing instruments of investment. To get SIP straight, the new investors, as well as many of the seasoned investors, get into trouble. To earn high returns and for investment, selecting the right SIP is a critical task. So here are some steps following which you can get the best SIP plans.

  • Investment Objective: Before you invest in a fund, you must know for what reason you are investing. To determine that, ask yourself two questions- first, you want to invest for long-term or long-term and second, how much risk you can take? Both of these two factors will help you to select the type of fund suitable for you. For example, if you are a kind of investor, reluctant to take many risks but like to have consistent returns without any hindrance then debt funds will be ideal for you. On the other side, if you are ready to take a risk and face the volatility of the market, then the ideal investment avenue for you is equity funds.
  • Type of Fund: -There are various types of mutual funds and you must know which one is suitable for you according to your risk appetite. The types are-
  • Asset Based Mutual Funds: -This kind of funds consists of equity funds, debt funds, and balanced funds. These funds have further classifications too. Debt funds are less risky and give good returns with assurance, equity funds are of more risk and work according to the market condition and the balanced funds have the features of both the equity and debt funds- risky as equity funds but provide good returns like debt funds.
  • Structure-Based Mutual Funds:-There are two kinds of structure-based funds- open-ended and close-ended. Investors can enter or exit open-ended funds as per their wish anytime there is no restriction. Close-ended funds are open till a particular time, when the new fund offer comes to an end you cannot make any investment here.
  • Past Records:-Go thoroughly through the performance of funds in the last three to five years and compare them. This can help you to determine how much strong or weak a specific fund is and how efficient the fund is in withstanding market volatility. You should avoid the funds, the performance of which is strong when the market is high but collapse when the market is weak.
  • Fund House:-A fund is directed by its fund house. The return yielding capacity or the growth of a fund- everything is shaped by the fund house. If the fund house does not take actions at the right time then you may lose your money. Therefore, before you start investing, read the fund scheme and the fund house in detail like the approach to investment of the fund house, how many schemes the house offer etc.

Apart from these, investing in SIP can turn to be a breeze for some other factors too like expense ratio and a load of entry or exit.