Tips to Get Maximum Returns from Your SIP

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The benefits that SIPs have offered to the investors in the past 4 – 5 years have been enough to make them the most preferred investment mode in India. While the fact that they come across as a less risky, less demanding of investor’s time only fuels the growth and demand from among the group of young investors.

But irrespective of how advantageous the famous mode of investment is, there are people who are still not able to make the most of them in terms of returns.

The lack of knowledge in terms of how to maximize returns on SIPs leads to a situation where investors are not able to make a lot of profit, thus driving them away from investing in SIPs altogether.

In this article, we will be looking into the ways investors can maximize their SIP returns, which would help give them an idea into the steps that they need to take to take advantage of SIPs up to its full potential.

  1. Stay Invested for the long-term

The biggest mistake that amateur investors make is that they remain invested in SIPs when the market is high but as soon as the market lowers they take their investment out. Basically, they treat SIPs like a stock market investment.

Remaining invested throughout the market cycle helps investors even out market volatility while enabling them to bank on the benefit of low price.

By leaving the investment in a time of a down market, you let go of the benefits that purchase of additional mutual funds unit as the per-unit price lowers as the markets crash. These same additional units can offer you a lot of advantages when the market rises again. So, the right thing for you to do is hold on to the funds till the market makes a full cycle – an event that typically happens in 3 years.

  1. Hold Good Number of Mutual Funds in the Portfolio

You should always aim for diversification when investing in SIP. While we don’t advise investing in more than 5 SIP plans at any given point of time, we would recommend you to invest in at least 3 – 4 SIP plans by equally dividing the money you have kept away in name of investmently.

For example – If you have Rs. 6,000 to start SIP, instead of putting all your money into one scheme, invest Rs. 1,500 in four high performing Mutual Funds like HDFC SIP, Axis SIP, SBI Sip, and ICICI Mutual Funds. Doing this will help you maintain some diversification in your portfolio.

  1. Increase Investment Amount

Why should you keep your SIP constant when clearly nothing is constant in life? Increase the amount you invest in SIPs with an increase in your savings.

It is not necessary to add another SIP plan in your portfolio with your increased investment amount. You can even increase the amount of investment in the present portfolio.

This step-up approach comes in handy when adjusting the returns in a time of inflation. Suppose you are investing Rs. 5,000 every month in HDFC Mutual Fund and then you increment it 10%. Now, in 10 years, you will get Rs. 16.87 Lakhs rather than Rs. 11.61 Lakhs you would’ve earned without a step-up SIP.

So, you should always aim at increasing your SIP amount as your income grows by activating a step-up SIP.

  1. Keep Different Dates for SIP Investment

Market volatility has a direct impact on how your mutual fund performs. In order to remove the risk, you should fix your SIP date on different time of the month, this way if the market goes down on one date only one of your SIP Plan’s returns will get affected.

So, if you are suppose invested in 5 SIPs, divide the dates like 1st, 10th, 15th, 25th, and 30th of every month.

There are a number of other tips that affect market returns, if you have some special tip of yours, do let us know in the comments below.