Prefer Direct Plan
You can get 1%-1.5% higher return on investment by choosing a direct plan. The regular plan charges 1-1.5% brokerage and the no-load fund charges even more.
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The expense ratio of the direct plan is less as compared to the regular plan. If you have opted for the regular plan of Equity Mutual Fund to invest Rs 10,000 every month for 20 years, then after 2% expense ratio and 12% annual return, you will get Rs 73.41 lakh. But, if you prefer the direct plan, then according to the 1% expense ratio, you get Rs 10.84 lakh more, i.e. Rs 84.25 lakh.
Select Step-up SIP
If you invest every month through SIP, then there is a huge benefit in returns by increasing it a little, which is called Step-up SIP. Suppose, if you invest every month for 10 years with a SIP of Rs 30,000, then at the rate of 12.5% return per annum, you will be able to raise a total fund of Rs 71.82 lakh.
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If you increase it by 10% every year, that is, Rs 30,000 every month in the first year, then Rs 33,000 every month in the second year, then Rs 36,000 and so on for 10 years, you will be able to collect a total amount of Rs 96.95 lakh. That is, by making only 10% increase every year, you can save 35% more.
stick to the correction and buy more units
When there is a big fall in the market or when the market is going through a bearish phase, then you get an opportunity to buy more units at a lower price. If you maintain your equity SIP during such times, it helps in averaging the investment cost. At such times, you should buy more units through lump sum investment, due to which you will get an opportunity to increase the wealth more and you will be able to achieve the target very soon.
Opt for SIP not lump sum
Lump sum investment can yield maximum returns, but for that you have to put money when the market is at the bottom and withdraw when the market is at the top. Now no one knows where is the bottom and top of the market. Therefore, by investing through SIP as compared to lump sum, you can earn good returns gradually.
choose index fund
Just like direct plans are cheap, similarly the expenses in passive funds are also less. However, the main objective of an index fund is to mimic the performance of the index in the market. The risk of the manager is reduced in such a plan. In actively managed funds, the higher the manager’s expense, the lower the returns of the fund, compared to low-cost, low-risk funds with little advantage.
One should invest in large-, mid- and small-cap funds keeping in mind their risk-capacity. Investors who can take more risk, they should choose small-cap and investors who take less risk should invest in large-cap only.
Diversification should be within a range, too much diversification is not good, else tracking the performance of too many funds within the portfolio will become difficult and even affect your overall portfolio returns.