To invest in Mutual Funds Monthly basis, you have to utilise Systematic Investment Plan (SIP), which helps you to invest in mutual funds on monthly basis other than making a Lump sum investment. All Mutual Fund houses, have this kind of SIP scheme for monthly investors.
Why should you invest in Mutual Funds?
There are scores of investors who wish to make a fortune by investing in the equity segments of the stock markets but not all investors have the expertise to make it a success and more than one have ended up burning their fingers. Investments in mutual funds are a way of reaping the benefits of equity investments by leveraging the expertise of the fund houses and their investment managers. But while doing so you need to have an idea about the options available to you.
Select Growth or Dividend Fund for investment
If your target is capital appreciation, opt for the growth plan. But remember, that to get the maximum benefit of this option, you should be prepared to stay invested for a period of 5 to 10 years. Whatever capital appreciation is earned from churning of the portfolio is ploughed back, and the principal amount keeps increasing owing to compounding which Albert Einstein called the “eighth wonder of the world.”
If you would like to have periodic returns on your investment, select the dividend options. Going further with this option, you could chose either to receive a payout of the dividend declared, or have the amount of dividend reinvested in the scheme, or transferred to an alternative scheme through a Systematic Transfer Plan (STP). If the option is for a payout, the amount of dividend will be credited to the bank account that you have designated. The amount of dividend reinvested is used to purchase additional units of the same scheme. In STP, the fund house acts on the mandate, and transfers the amount of dividend to the specified scheme. Keep in mind that dividend is dependent upon availability of a distributable surplus. Further, release of dividend, results in fall in the NAV of that plan to the extent of the dividend disbursed.
Demat Account for Mutual Fund Investment
Investors who have a demat account can invest online by using the demat account. Investors could also approach their bank for help in investing in mutual funds as this is a fee based business for banks. Another option is to find an investment advisor, preferably a reputed establishment, that should be selected after due diligence regarding the quality and reliability of services. If the investor has decided the fund house with which he wishes to make the investment, he could also contact the fund house directly and a Relationship Manager will provide the requisite assistance. There are also web sites that provide valuable intellectual inputs regarding investment in products of mutual funds.
Why Monthly Investment is Better?
Investment in a mutual fund scheme could be either lump sum or through a Systematic Investment Plan (SIP). Most of the time, the SIP investment will earn better returns over a long period of time than a lump sum investment. SIP makes the most of the law of averaging. Investor money purchases more units when the stock indices are in decline and the NAV of the fund is lower. When markets recover and the NAV improves, those units will deliver a much better return
Recommended Read : How to Select Best SIP for Monthly Investment?
