Having a clear strategy in mind is essential when making investments, especially for schemes linked to market volatility like Mutual Fund Investment. A Systematic Investment Plan is one such investment method that allows you to strategise your investment in a structured manner. With SIPs, you can invest by making small contributions regularly.

The SIP has undoubtedly become a go-to investment method for several investors. However, here are some things that you must carefully consider before using SIP to invest in Mutual Fund.

Investment amount

The amount you wish to contribute to your SIP Investment is something you must decide before you sign up for the plan. Considering your cash flow, expenses, and other financial obligations is essential beforehand is a necessity here.  Besides, think about your financial goals and the expected returns. Do not just blindly go for any amount. Your investment should work in tandem with your financial goals.

Using a SIP calculator comes in handy in your decision making. It gives a fair idea about the returns you can expect from your investment that helps determine the sum you should invest.

Investment time frame

The duration for which you wish to invest your money in SIP Plans is another aspect that you must think about. Generally, the time frame depends on the financial goals you want to achieve. The best way to go about this is to categorise your goals as short term goals, mid-term goals, and long-term goals. So, you precisely know what goal you want your investment to achieve within a specified time and invest accordingly.

When you have a deadline for your goals, you work more efficiently based on where you stand and where you need to get to.

Risk appetite

Your risk appetite is an important consideration to remember when making any investment. Be very clear about the risk you can afford primarily with market-linked investments. Several factors influence your risk appetites, such as your income, investment horizon, and financial goals and needs. Your age also plays a role in deciding the risk appetite too.

A relatively younger investor would be willing to take more risk than a middle-aged investor or someone nearing retirement. A younger investor has lesser liabilities and dependants to take care of and bears the higher risk. The ideal way to invest in any market-linked investment is to choose a diversified asset allocation to minimise the risk involved.

Remember these aspects before you decide to open that Mutual Fund app and begin the investment journey.