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SIP or Systematic Investment Plan is one of the most flexible ways to invest in Equity Mutual Funds, and the most significant feature of it is, it takes only a few minutes to start a SIP in mutual funds. You can log into an online investment platform, enter your details, link your bank account, and start transacting.

Well, today we are not going to discuss the feature of SIP, neither how much beneficial it is to invest via SIP in mutual funds. Instead today we will be discussing how to analyze or calculate, your SIP investment that is your SIP amount!

The answer about how much should you have in one SIP and how much in aggregate SIPs, strictly depends on two things, that is whether you are investing for your defined goals or wealth creation. Your monthly SIP amount will be a result of this.  

SIP Amount For Defined Goals!

Basically, investors have two kinds of goals either long-term or short-term. It is much easier to decide your SIP amount when you have your goals defined. SIP investments are mostly recommended to investors who plan for long-term investment. However, it is also a good idea to start a SIP investment in mutual funds for your goals that are 2-3 years away which is even for short-term goals.

So, when you plan to start investing in mutual funds via SIP, start with defining your goals. Once that is done put a time period to it; say goal A needs to be achieved in five years and goal B in 8 years and so on. Then assign values; goal A needs Rs 15 lakh after 5 years and goal B needs Rs 20 lakh after 8 years. Now at last fix, your expected return rate from your investment, say 12% a year.

For goal A, you need to make a monthly SIP of Rs 6,000 and for goal B you need a monthly SIP of Rs 5,000. If these are the only two goals you want to work towards, then your SIP amount is Rs 11,000 per month.

Now it's time to deal with your salary and expenses. Check the proportion of your monthly salary, calculate your monthly expenses, and then calculate your SIP amount, remember your savings should be at least 30% of your monthly salary. If it’s anything lower, top it up with the difference and that amount can be your long-term wealth creation kitty.

SIP Amount For Wealth Creation!

If you have all your long-term goals already financially protected, and you don’t have a defined goal to plan for, then best is to look towards investing for wealth creation. Ideally, when you are investing only for wealth creation, the assumption is that you are doing this to support a certain lifestyle post-retirement.

Ideally, save and invest at least 30% of your monthly income. If you don’t have any defined goals or emergency fund needs, then you can invest this entire amount in equity. Or else, mark out the amount required to top up your emergency fund and then invest the rest through SIPs in equity mutual funds.

For example, if your monthly post-tax income is Rs 300,000, invest at least Rs 90,000 in equity SIPs every month.

Also, it is recommended to go increasing your SIP amount every year and do not leave it dynamic when you can afford to increase it. This will help you efficiently achieve your wealth creation goal.

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For any kind of query you can contact us at Shri Ashutosh Securities Pvt Ltd., we are here to help you in any way possible.

Happy Investing!

(Mutual Fund investments are subject to market risk Illustrations are for example only, there is no guarantee of returns. Past performance is not an indicator/guarantee to future returns).