Investing in mutual funds early is critical for long-term financial planning and security. Mutual funds are an excellent method to diversify your portfolio and lessen the risk of investing in a single stock. If you start investing in mutual funds early, you will benefit from compounding returns, leading to higher returns over time. Furthermore, when your financial resources grow, you may invest more in mutual funds, boosting your entire savings. Investing in mutual funds early in life is crucial to a solid financial future.
But a major issue for a lot of people here is the lack of a solid salary. But that doesn’t mean you have to wait until you have a sizable salary to start investing. Read on to find out how you can begin investing with a salary under Rs 30,000.
What is an SIP?
A systematic investment plan (SIP) is an investing technique in which a specified quantity of money is invested in a certain asset at regular periods, such as stocks, mutual funds, or ETFs. It is a low-cost strategy to construct an asset portfolio over time since it lets you invest with smaller amounts of money while benefiting from the compounding power of investments. Investing in lesser sums over time allows you to minimise their risk and focus on creating a diverse portfolio. SIPs also enable you to profit from cost averaging by purchasing more units when prices are low and fewer units when prices are high.
Things to consider when investing with low salary
Financial goals: Before investing in any SIP, it is important to understand the financial goals for which one is investing. Are you investing for the long-term or short-term? Are you looking for capital appreciation or income? Understanding these goals will help you determine the amount that you need to invest in a mutual fund.
Risk tolerance: An important factor to consider while investing in an SIP with a low salary is the risk tolerance level. You should be aware of the risk associated with the fund. If an investor is risk averse, then they should invest in debt funds which provide consistent returns. On the other hand, if an investor has a higher risk appetite, then they should invest in equity funds.
Asset allocation: It is important to allocate your assets according to your financial goals. For example, if the goal is long-term capital appreciation, then investing in equity funds is recommended. On the other hand, investing in debt funds is recommended if the goal is short-term income.
Investment horizon: The investment horizon is an important factor to consider while investing in an SIP with a low salary. An investor should be aware of the time period they are investing for to achieve their financial goals.
Conclusion
Investing early and with a small sum allows you to accumulate a sizable corpus over time. You may progressively raise the amount you invest in SIPs as your income grows. This will allow you to increase your wealth more quickly. Investing in SIPs is straightforward and easy. The best aspect is that managing your money does not need much time.
Hence, if you want to save money while also growing your wealth, SIPs are a good solution. With just Rs 500 or less each month, you may begin investing and amass a sizable corpus over time.