Investment in mutual funds through SIP is growing every day. SIP is a popular way to invest. Many people now invest in SIP every month. But because mutual funds depend on the market, returns are not guaranteed. In the last few years, investors got an average return of 12 percent from SIP.
SIP is often chosen to invest in mutual funds. Let’s use a SIP calculator to see how much money can be made by investing ₹8,000 every month for 10 years. Let’s first look at this calculation.
If an investor puts ₹8,000 every month in a SIP for 10 years, at 12% return, they will get ₹25,23,000 at maturity. In 10 years, the capital will grow to ₹9 lakh.
How to Assess Mutual Fund Risk
Mutual funds are an easy way to invest, but investors should know the risks. The main risk comes from the stock market. Equity funds depend on stock market changes. Debt funds are affected by interest rates and credit quality.
Debt, small-cap, and micro-cap funds also have higher liquidity risk, meaning it can be hard to withdraw money during stock market drops. Investing in only a few sectors also increases risk because it reduces diversification.
If fund returns are less than the annual inflation rate, it can reduce the real value of your money. Returns also depend on investor behavior, like switching funds after losses or chasing high returns.
Farhad Gadiwala, Executive VP at UTI AMC, says that mutual fund returns depend on the stock market. No one gets a fixed return; it changes over time. That’s why it is important to invest for the long term.