While investing in a mutual fund scheme, an investor considers a variety of key factors including the NAV of mutual funds, their past performance, and the risk involved. Another important feature that investors consider is the mode of investment, the most popular of which is investing through a systematic investment plan (SIP). Of the several benefits that an SIP investment offers to investors, its cost-effective nature is the most popular one. Thanks to simple guidelines that can easily be accessed online, most first-time investors know how to invest in SIP online but aren’t very sure about how they must plan their SIP investments. First-time investors looking to invest in IT companies can enter their investment journey more confidently by following the SIP investment plan outlined in this article.
How to plan one’s investment in IT companies before starting an SIP online?
Before understanding SIPs and mutual funds, investors must know the answer to the question “What is an SIP?”. A systematic investment plan is a mode of investment that enables the investor to invest smaller amounts in a mutual fund scheme at regular intervals. It leverages market volatility to help the investor maintain investment discipline without worrying about timing the market. Here are the steps that an investor must follow to plan for investing in IT companies:
- The investor should clearly define their investment objective
Since the investor has already defined the type of companies in which they would like to invest, they must next define an investment objective. Some examples of investment objectives would include financing a trip to Europe or arranging for the funds to buy a new house. While defining their investment objectives, investors must also estimate their value in the future by accounting for market volatility and inflation.
- They must conduct a ‘risk versus returns’ analysis and assess their risk-taking capability
Next, investors must conduct a risk assessment and analyse their risk-taking capacity. The mutual funds that the investor will choose after making this assessment will be well-suited to their investment style.
- Investors must then research IT companies online
The most important step in this five-step process is researching and comparing IT companies online. Investors must analyse the past performance of IT companies, read about their management over the years, and also learn about their growth prospects in the future.
- They must determine their investment horizons and keep increasing their investment amounts
Next, investors must determine their investment horizons. This step is crucial since it helps the investor time their investment and get a better idea of the returns that they can potentially generate.
- Investors must use an SIP plan calculator to calculate their SIP returns
An SIP calculator is a free online tool that the investor can use to calculate the returns of their SIP investments in IT companies. Investors must enter their investment amount, horizon, and the expected rate of return per annum to know the total returns that they can potentially earn.
- Choosing a mutual fund scheme
Finally, the investor must choose a relevant mutual fund scheme and invest in the IT companies of their choice. They must check the mutual fund’s management and NAV (Net Asset Value) before making any investment decision.
Investors looking to leverage the growth offered by IT companies in India can follow this five-step procedure to plan their SIP investments. An SIP calculator can help first-time investors plan for an SIP investment in IT companies.
