Want the Elixir of Wealth? Take Your First SIP

stack of coins

The COVID year 2020 has passed. We have also been through the first, second and even third wave by now. We understand that times are tough, especially if you have lost someone close to you. Protection of health is something we are trusting the Medical teams and Government Authorities to take care of. On the other hand, we pledge to protect your wealth by introducing you to the best vaccine, i.e. SIP!

While protecting wealth was always important, these tough times have taught us to be extra vigilant. We will do our best to equip you with the best strategy for building well-protected wealth!

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SIP is the acronym for Systematic Investment Portfolio. For the layman, it is the strategic investment of your savings every month, as an EMI in financial instruments that build wealth over time.

The basic difference between an EMI and SIP? You can read it over here, it explains with examples!

Which Financial Instruments can we SIP in?

meme on SIP is for mutual funds

In your defence, you are not alone. There are a lot of people that think SIPs are done in Mutual Funds only! However, SIP is just a method of investing. What you invest in can differ.

You can SIP into the following types of financial instruments, including Mutual Funds, Stocks, Gold and ETF.

Let us give you a brief on all the financial instruments where you can invest through SIPs.

First Option: Mutual funds

This is an option that everyone knows by default! You invest in Mutual funds using SIP for compounded wealth.

The only thing to be kept in mind is the selection of a Mutual fund to invest in. We aren't talking about just the name of the mutual fund. Several factors will decide which mutual fund you go for! These factors will also affect the amount you put in every month through SIP.

Factors:

  • What is the goal of your investment?
    • Your goal decides the amount needed at the end, hence lets you choose the Mutual fund with the best Return on Investment.
    • How long do you need to invest in it?
  • Do you want Tax Saving investment option?
  • Do you want to earn a Monthly Income from it?
  • Do you want maximum gain? (at the cost of risk)
  • What type of investment fund - Debt funds, Equity funds, ELSS (Tax-saving)

A mutual fund is a wide topic! We will explain all the types and nitty-gritty in a separate post soon!

Second Option: Digital Gold

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Ever since the invention of Digital Gold, SIP-ing into gold became really easy and effective!

Digital Gold is still your regular gold, but it is bought and sold online on similar platforms as stocks. There are several different apps available for buying a digital form of gold.

For example, PayTm, Google Pay, Zerodha, Groww, etc.

Here you are guaranteed 24 carat Gold! If you need further information on this you can read our article here. It explains everything in detail!

    Third Option: Stocks

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    This is something most people miss out on! Yes, you can invest in your favourite companies share through the SIP route.

    However, investing in stocks is not for the faint-hearted. If you don't understand the stock market, usually this option should be avoided. You will find plenty of rumours, free advice, Twitter posts by the dozen suggesting what to take and the mass mentality following them. You should be smart about which stock to pick. Once again the initial factors that we discussed in the Mutual Fund Option above come into the picture. The stock should be chosen keeping all of those factors in mind.

    In case you have the knowledge about the stock market - Great! If not, then we'd suggest asking professionals that do this for a living.

    If you don't know where to look, don't worry, help is just around the corner!

    Fourth Option: ETF!

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    ETF or Exchange Traded Funds (What are ETF?) are another candidate for SIP.

    ETFs can be invested in the same way as a regular stock of a company, i.e., on a stock exchange.

    ETFs mirror the underlying asset's price, e.g., Nifty, NASDAQ, Gold, NIFTY IT. They go in the same direction as these assets, but they have their own price.

    Example: LIC MF ETF - SENSEX - this ETF will mirror the price of SENSEX (since its start in 2015, it has given 102% returns), SBI ETF - GOLD will mirror the price of gold (since its start in 2009, it has given 189% returns) and its changes every day, etc.!

    Historically, all the underlying assets have gone up, i.e. they have grown; hence the ETF can be a good long term investment option! Also, since most ETFs are not dependent on 1 single company, hence your portfolio becomes safe!

    ETFs are usually not very expensive, and hence you can start a SIP with a low investment of even up to Rs. 100/month!

    Note: All the examples given above should not be considered as advice. We have chosen examples randomly to give the reader some perspective!

    Too many SIPs?

    The beauty of a SIP lies in the fact that, unlike regular EMIs, you can pause and restart a SIP whenever you want!

    This makes sure that you are never burdened. If you face a tough month, you can pause your SIP. If you have some extra bucks saved up this month, you can add money into the option selected on top of your SIP.

    This flexibility allows you to stay free and not feel locked up.

    SIP is also done in NPS (National Pension System) schemes. However, since in NPS the SIP remains constant, a good percentage of money, in the end, has to be re-invested in pension schemes, and there is a strict lock-in period (until you reach 65 years). Hence we avoided discussing that option for SIP above!

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