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6 To-Dos After Setting up Your SIPs

6 things to take care of after setting up the SIPs

All the  mutual fund companies, these days are focusing big time on promoting monthly systematic investment plans (SIPs). Thanks to SEBI for pushing it down their throats, to spend mandatorily for investor’s education. However, this promotion of SIP has resulted only in making people aware about how to start investing using SIPs, but most of us are still skeptical about all that follows next. Let us see what are the six main things one should take care of after setting up the SIPs.


1) Regular Monitoring

Regular Monitoring

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SIPs are best suited for our long term goals, However, once we set up the SIP, it is essential to monitor it and do the necessary changes if required.

Fund selection review is one such thing to be monitored. While performance & holdings of the fund needs to be monitored, one should also keep track of the fund manager.

Recent mergers of various mutual fund companies have caused their fund managers to often change their job. This  can adversely impact your chosen fund future performance. (Know about our fund selection process)


2) Appropriate Allocation

appropriate allocation

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While SIP has a basic advantage of saving first and spending the remaining, care should be taken, not to start with all the monthly surplus.

It is advised to begin with approximately, half the monthly surplus and raise the monthly investment once you are comfortable with the new situation.

So, one should gradually increase the commitment to save, so that he doesn't find himself in a financially crunched situation.


3) Flexibility to change scheme & investment amounts


Discipline plays a very important role in your investment journey, therefore one should try to save regularly without skipping a single month.


However life is uncertain and one can face a situation where it is not possible to continue with the earlier fixed amount of monthly savings. Most of the banks do not allow such changes and have certain restrictions. For example  6 months minimum period etc.

Adequate care must be taken, that change in SIP amount and change in Scheme should not be cumbersome. And the change of amount can be done in future to cover-up for the deficit amount. One should make use of such facilities to make their financial journey smoother.


4) Annualized returns calculation


While it is easier for most of us to calculate the returns of one time investment, it becomes difficult to calculate the returns in case of SIP.

That too if one has changed the SIP amount in between or, withdrawn part of the amount, or even added more amount.

Most of the portals don't display the portfolio returns and just do away by showing you the individual scheme returns. In such cases, we recommend you should use the XIRR formula of Microsoft Excel to calculate your annualized returns.


5) Yearly increase in savings amount

yearly increasing

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One should seriously consider increasing the monthly savings amount as and when their salaries increase. This is particularly important when one is saving for his long term goals. Consider this:-If Mr Ram, aged 35yrs, is saving for his retirement. He has 25yrs left for this goal. If he saves 25000/month for the next 25yrs with no increase after one year, he will have 4.2 Cr amount at the time of his retirement.


However, if he increases his monthly contribution by even 5% yearly, then at the time of retirement he will have 6.2 Cr amount. That is 2 Cr additional amount without straining his finances!! A smart way indeed !!

(Both the figures above are calculated @ 12% returns)


6) Management of corpus when goal is near

Last but not the least as the goal comes nearer (less than 3 yrs), we should move a part of the amount to safer "Debt/Liquid Mutual Funds" as you don't want your entire corpus to be exposed to the market risk.

This movement of funds is not dependent on the market but instead dependent on the time left for the goal.

If the points mentioned above are carefully considered then definitely long term investing in stock markets by using SIP becomes a stress free experience.


Happy investing!!


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