A Few Rules to Make the Best of SIP (Dollar Cost Averaging)
Investing in mutual funds in a disciplined manner
A Systematic Investment Plan (SIP) is an investment tool which allows the investor to invest a fixed amount at regular intervals in one or more mutual fund schemes. In US, this is called Dollar Cost Averaging (DCA).
Start as early as you can, you'll have more time to compound your capital.
Automate your investments for every month.
Use equity mutual funds for your long-term financial goals.
Use debt mutual funds for your short-term financial goals.
Have a separate investment for each financial goal.
Always choose the 'Growth' option in the mutual fund.
Invest every month, no matter what - be consistent.
Monitor your portfolio once or twice a year.
If your income rises, increase the investment amount.
Ignore the ups and downs of the market if you are disciplined in your SIP.
Start redeeming your long-term investments 2-3 years prior to your goal and put that in a liquid fund.
Top-up your investments if you have extra cash in hand.