Ideal Amount to Start SIP Investment

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Almost all of us are seeking financial freedom. Going with the definition, it is to make your life decisions without being overly stressed about the financial impacts as you are prepared in advance to face all the challenges. What do you want in life, control your money or let your money control you?

Well, if it is your money which is controlling your life, goals, and dreams, then it is not a right thing. To control your money, you need to seek financial freedom and for that investment is important and there is no get quick-rich strategy.

Talking of investments and financial freedom, you will hear about Systematic Investment Plans (SIP) in mutual funds. It is considered as one of the most safest and reliable modes of investment where you can start with just Rs 500 and in some cases, it is even Rs 100. With SIP route to equity investments, you can accumulate a good corpus in a long term.

Let’s find out what is the ideal amount to invest in SIP and more about it.

Ideal Investment Amount In a SIP

You will be glad to know that there is no such thing as an ideal amount to invest via SIP. Also, if your friend has started an SIP of Rs 1000, it is not important that you too initiate investment with the same amount. Select the amount you are comfortable with, also check if the selected investment amount is apt for your risk appetite and investment horizon. Now, before investing the selected amount, make sure you define your financial goal in advance. This would help you to plan in advance about how much you need to invest and how much you can accumulate from it.

You must have several investment goals, but arrange them into priority and invest accordingly. The most common ones are:

1. Money as emergency corpus
2. For your child’s higher studies
3. Child marriage
4. Retirement
5. Buying a car/ house/ going on a vacation
6. Wealth creation, etc.

First and foremost, investment should be made to collect an emergency corpus. Well, now the question would be how much to save as contingency fund. Ideally, you must save an amount that is required to carry out your monthly expenses for around 2 years approx. Once you comfortable saving for your emergency needs, you can go on with the next step of choosing the nearest financial goal which you want to accomplish and invest in SIP accordingly.

To find out the correct amount you need to invest to reach to some target amount, you can make use of SIP calculator at MySIPonline. It will also suggest you some good plans according to your risk appetite and tenure.

How to Determine Monthly Investment Amount According to a Set Goal?

To explain this, let’s consider a case. Suppose you are an investor who is 30 years old and have a daughter of 2 years. You are willing to invest for your child education where your targeted amount is Rs 22 lakhs (average engineering expenses). Now, as you know that the amount of Rs 22 lakhs would be required when your child would be at least of 17 years. This means you have 15 years in hand to accumulate the set amount.

For the set target, you can start investment in a good small cap fund because the time horizon is long-term, so the risk factor gets reduced. Assuming the returns of 18%, you can start by investing around Rs 2500 per month. Given that the amount is not much, you can choose one scheme at a time, for instance, HDFC Small Cap Fund. This is one example of how to determine the investment amount. If you too have a goal to achieve in a long run, consult your financial expert and seek recommendation asap. The best part about investing via SIP is that you don’t need to time the market.

The Final Take

Ideally, there is no fixed amount to invest in a SIP. The first step should be determining one’s investment objective, risk appetite, expected returns, etc., and then invest accordingly. Remember, investment should be made separately considering each investment objective. Such goal-based investment ensures each investment is segregated and is meant for a specific purpose.

In case you need help with the recommendations or suggestions in SIP investment, connect with the experts at MySIPonline.