SIP Investment: How to know if you are investing the correct amount?


Mutual funds are one of the most widely availed investment options by individuals to achieve their financial goals. Investors either go with the lumpsum way or Systematic way – Systematic Investment Plan (SIP) to invest in mutual funds. Though there are number of articles on the internet providing information about why one should invest in mutual funds via SIP, not much is covered about determining the investment amount required to invest in SIP. This article aims to do the same. Read on to know more.

Tips to ensure the right amount for your SIP investments

You can invest in SIP any amount that you deem appropriate for your investment portfolio. While, the minimum amount to invest in mutual funds via SIP is Rs 100 per month, there is no upper limit. You can invest as much as it is required to fulfil your financial goals. Here are a few tips and tricks that will ensure that invest in correct amount in SIP mutual funds.

Identify your financial objectives

An investor must be crystal clear behind the intent of their investing. Their financial goals must be SMART – specific, measurable, achievable, realistic, and time-bound. You must not make random decision without thinking of the consequences. Here are a few things you must keep in mind before entering the markets:

  1. Start with planning your budget. After that, determine the surplus amount left and how you can afford to save every month. Many investors invest in mutual funds via SIP just because they have a good performance track, but end up failing to cope up with the expenses. This might do more harm than good. Make sure that you do not make such blunders.
  2. Analyse your risk profile – If you are one of those investors who gets a little panic attack every time the markets take a dip, you might be better off investing in fixed-income securities. Thus, it is very important to analyse your risk appetite to determine the right type of investment for your portfolio.
  3. Investment horizon – Understand the intent behind your investment. This will help you determine if you wish to invest in mutual funds for a short-term or long-term. The right investment amount would be the one that helps you yield desired rate of returns within the defined time limit.

SIP calculator

Once you know the above parameters, you can easily calculate the monthly investment required to achieve a specific target using an SIP calculator*. Just input your expected rate of returns, target investment corpus, investment horizon and click on calculate. Volia, the SIP return calculator will do the complex calculations for you and provide you with an estimate investment amount need to be invested each month. Do not forget to factor in inflation as inflation can eat away your returns.

Research shows that random SIP investment amount such as Rs 4523 per month is likely to be continued for a longer duration with much more discipline than round figure SIP investment amount such as Rs 5000 per month. This is because the former is most likely to be started using a mutual fund return calculator to achieve a specific goal such as your child’s marriage or retirement. On the contrary, the latter is mostly likely started on an ad-hoc basis, so an investor might withdraw their investments at the slightest hint of volatility in this case. Happy investing!

*Note that SIP calculator is not a definitive indicator of the future returns on your mutual fund investments but rather a tool that can help you estimate the future value.

To achieve the most optimum results, it is advised to start your SIP investments after you have drafted your financial plan. Also, your job as an investor does not merely end at investing in mutual funds. You must constantly track and monitor your mutual fund investments. Happy investing!

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