ABC of SIP Mutual Fund Investing
A : Act early
Give your money time to grow. See the example below it is self-explanatory.
if your goal is to Save around 14 Lakh rupees for a goal which is 30 years ago. Let’s assume the rate of return is constant 12% per annum compounding. Here is what will happen if you invest today you will have to put in Rs. 2000/- per month in SIP however if you start saving 5 years later you will have to invest Rs. 4279/- to accumulate the same amount. So plan for expenses as early as possible. Expenses like retirement, child’s education/marriage etc can easily be planned in advance.
B: Back fund selection with a goal and research
Buy funds only after you have set a goal. A goalless investment may not meet your needs when you need the money. Hence do not just start a SIP of a random amount but plan the expense and invest accordingly. The choice of funds to invest would depend on multiple factors like your risk appetite and time you have in hand for your goal. Consult your financial advisor to get the details. If you are planning to do it yourself make sure you read well about the investments that fund houses make and keep reviewing your goal and investment at least once a year.
C: Continue investing even when markets crash or stay low
Market crash and low is your friend when you are in accumulation(investing) phase. When markets are low your SIP amount will fetch you more units of the mutual fund. Once you keep investing regularly you would have accumulated large amount of units that you can redeem near to your goal when markets are doing well. Remember selecting the point of exit is as important as point of entry.
TIP for a conservative investor: Try to exit the equity mutual fund investment 1-2 years before the date you ned money for the goal. You can park this money in debt or arbitrage funds to minimize losses of any. This way you will lose the rally if any in 1-2 years but you will still save your corpus if the market crashes.
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Inflation in very simple words mean value of your money goes down and hence you would need more money to buy same good or service. Let’s take example of a barber, a barber may be charging Rs. 100/- for the hair cut today but in next 10 years the same barber will be charging Rs. 259/- If inflation rate is 10%. So for an effective calculation of inflation the goods and service that you buy with money needs to be constant. In the case of barber haircut today or few years down the line is the same service. Price difference between iPhone 4 vs. say iPhone 10 may not all be because of inflation as both are different products. This is a very simple way of explaining inflation as you know iPhone will use some common components like silicon chips whose cost will increase because of inflation. As in the highlighted example you can see at a nominal inflation rate of 8% something that costs Rs. 10000/- today will cost Rs. 46610/- after 20 years. This is a very simplistic form of definition; you are interested in knowing more about inflation you should 
LIC of India is one of the favorite investment destination for Indians. Each year LIC collects more money into its endowment plans compared to all other insurance players in the market. The popularity of LIC of India’s plans are such that LIC collects most of the premium through its endowment plans. These plans over the years have gained trust and millions across India flock to buy these policies. When asked most people say they do not buy it as an insurance product but buy it because it is a trusted company that has a track record of at least not losing money.
