Confused by investing? Demystify SIPs and mutual funds in minutes

The mutual fund industry has come a long way from its humble beginning in1964. Advancements over the decades since then have made mutual funds more accessible, cementing their position as a key investment vehicle. However, it still has a long road to traverse as even today the majority of investors do not understand how to make the best investments. Usually, one often tends to rely on their financial advisors/agents for making retail investment; therefore, it is sacrosanct to break down mutual funds and SIPs so that common people can use it to grow financially.

The biggest impact such investments can have is essentially on your savings. We all know how inflation impacts everyday life, crunching our savings slowly but steadily. Measured as Consumer Price Index (CPI) it was recorded at 4.75% in May 2024 according to the latest Ministry of Statistics and Programme Implementation data. Thus, when you invest systematically in SIPs or mutual funds, you get regular savings and better returns, thereby beating inflation, and living the life you always aspired for.

SIPs and mutual funds can be designed to chase both short-term as well as long-term investment goals. It is, however, vital that credible information is sourced about the funds to invest in; or banks on such goal-oriented investment platforms that provide research-based insight into the most suitable funds as per one’s financial goal. A point to note here is that ELSS is the only class of mutual funds that come under the purview of Section 80C of the Income Tax Act, 1961, where investments up to ₹1.5 lakh are exempted from taxation. It is essential to understand that mutual funds are not a get-rich-quick scheme, rather a tried-and-tested investment vehicle that has stood the test of time.

If you are starting out, then you must assess your risk tolerance and then choose the correct type of mutual fund scheme for yourself. For example, equity schemes are generally riskier than debt schemes but also provide higher returns. On the other hand,⁠ SIPs instil a disciplined approach towards investing. With the autopay feature, as offered by some apps, you do not have to remember to invest. The amount is directly deducted from the account, making investments more seamless.⁠ SIPs also eliminate the need to time the market as they lead to rupee cost averaging.
 

The world of SIPs and mutual funds can be confusing, and one never knows when and how to start or stop. It is suggested that one must have specific goals when considering investing in order to pick your assets efficiently. That also encourages one to stick to their investment strategy. Such a goal-based investment approach will empower people to build specific goals and track them individually, by assigning each investment to a goal. This way, one can aim higher once they achieve one goal.

Speaking about retail investment, gold SIPs as well as digital gold too have emerged as a preferred investment options, considering their vast scope of growth and durability. Fintech disruptors like us are taking further strides by combining the mettle of both mutual funds and digital gold investments, so that Indian retail investors, majorly bogged down by their many responsibilities, get the best return of whatever investment they make out of their hard-earned money. All that is awaited now is for you to set your financial goals and get started without any intermediary.

Veerkaran Gill, Co-Founder and Chief Financial Officer (CFO) of Fiydaa.