Why You Must Increase Your SIPs Every Year - Axis Bank

Have you ever planted a seed to grow a tree? 

If you answered yes, you are aware that it needs good soil and a reasonable amount of water and sunlight. As a result, your seed will soon grow into a plant.

However, if you want it to grow into a full-grown tree, it will require more water than it did previously. That’s similar to how investments work!

A Systematic Investment Plan is an excellent strategy for achieving your long-term or short-term financial objectives. Learn more about them and how to invest in SIPs.

SIP provides excellent investment opportunities that are time-bound and structured. As a prudent investor, you can understand how to maximize the returns on your mutual fund SIP investments.

4 reasons why you should strengthen your SIPs every year

Build your investment portfolio

Most people begin investing through a SIP but never consider increasing their contribution, even if their income and surplus increase yearly. Increasing your SIP installment increases the power of compounding and the potential return, allowing you to build a larger corpus to meet your future financial goals.

Increase your monthly SIP installment year after year if you want a large sum in your hands at the end of 10, 15, or 20 years. Even a small increase can have a significant impact in the long run.

Better planning

Inflation has long been a source of concern. As a result, having fixed systematic investment plans is not recommended if you want to survive when inflation becomes uncontrollable. As a result, it is preferable to review the portfolio each year and increase the SIP corpus to account for volatility.

Counters inflation

Inflation may have been lower recently, but it is not going away. Saving Rs 5,000 per month five years ago is not the same as having saved Rs 5,000 today. In fact, at a 6% annual inflation rate, saving Rs 17,000 per month for ten years would equate to saving Rs 10,000 now.

Today’s savings are more beneficial than future savings. Given that money depreciates year after year, financial freedom necessitates proactive measures to stay ahead. Starting small and rising your investment opportunities each year helps more than you could ever imagine as long as those steps place you ahead of inflation.

Review the Funds

Every investor’s primary goal is to maximize their returns. As a result, it is critical to monitor how the fund performs in the market. A negative performance graph puts you at greater risk and may influence your investment decision. You can take your money out of that fund and invest it in other mutual funds doing well. However, before deciding, consider the returns over at least a few years. Good asset managers can manage market volatility quite well to challenge temporary conditions.

How can you strengthen your SIP?

Choose the correct scheme

 If you are looking at SIP plans that allow you to increase the amount regularly, make sure it fits your risk profile. For example, if you prefer a conservative approach, you should consider a balanced fund, whereas an aggressive investor should consider a mid-cap equity fund.

Determine the frequency

When you choose to increase your SIP at regular intervals, you could specify the frequency and amount you want your SIP to grow. There are fund houses that allow you to increase your SIP amounts biannually.

Identify investment cap

Investors can limit how much they want to invest each month. This way, your SIP will continue to grow until it reaches the ceiling amount, at which point it will become a regular SIP with much the same investment amount each month.

Conclusion

Yes, when inflation is factored in, the purchasing power of these sums will be lower than the figures indicate. However, if you fully comprehend your financial objectives, plan for them, and invest appropriately, starting small will not hinder your financial security.

Finally, keep in mind that even a 5% rise means a 20% increase in savings. In the case of making investments, something is always preferable to nothing.