How to start regular investments with mutual funds and e-wallets

There are many ways to start investing regularly. A mutual fund SIP is perhaps the simplest way to start. You don’t have to worry about security selection; pick a mutual fund scheme, a suitable date every month and the amount of surplus you can invest each month to get started.

In the case of mutual fund SIPs, you can pause them in difficult times or top them up with surplus funds when you have that ability. Your mutual fund distributors, advisors, online platforms and now even e-wallets can help you automate and regularize investments for building that long-term cushion or your emergency fund.

If the last year and a half have taught us anything, it’s the importance of saving and converting those savings into regular investments. As individuals, we have little control over the external circumstances and yet, these circumstances can create chaos in our personal and financial lives. One way to protect ourselves from the damaging impact of perilous circumstances is to manage money proactively by saving and investing for the future.

It’s not only important to convert your savings into efficient investments but also to do it regularly. Automating and regularizing investments on a daily basis is a good start to managing your money proactively. Regular investing gives you the advantage of putting aside money in good times, which can slowly compound to a protective cushion for the unpredictable bad times.

To facilitate this automation and regularizing of your investments you have to start committing towards long-term growth by investing defined amounts at fixed intervals.

Regular investing does three things; firstly, it enables you to put aside your surplus funds gainfully. Secondly, for your long-term investments, it helps you invest at various price points, ensuring that you needn’t bother about it being a good or bad time to invest. Lastly, it is habit-forming and gives you the right behavioral push needed to build a financial cushion for the future.

Along with all this, regular investing is also the best way to take advantage of compounding.

Sample this- did you know that Rs 1 lakh invested at 10 percent for 20 years grows to be Rs 6.72 lakh? That’s the power of compounding which allows you to earn more on your gains if you leave the investment untouched. Let’s take this a step further. If instead, you put aside Rs 1,000 a month for 20 years, for the same return you would have Rs 7.7 lakh at the end. This is the power of compounding plus regular investing. You are not under any pressure to invest large lump sums. In fact, with regular investing even small amounts, every month can become large over time.

Thanks to the pandemic, we have all learnt how to order groceries, pay utility bills, recharge our phones, pay the vegetable vendor, repay a friend, and do some online shopping.- all of it with our e-wallets. Now you can also invest in long-term products such as equity mutual funds or even park your money in stable short-term investment options such as liquid funds, directly from their interface.

When money lies in your bank or your e-wallet, unutilized, you not only have an opportunity loss in terms of what you could have earned by investing the money instantly, but also there is a huge temptation to spend that money on your next purchase. Instead, link your surpluses in banks and e-wallets to start a daily, weekly or monthly SIP and invest as you earn. A daily or weekly SIP works well if your income is received on daily basis or if you rely on a monthly salary, then go for a monthly SIP.

Any investments made in mutual funds will be made in your name after know your customer or KYC details are completed. If you invest in mutual funds through e-wallets, there is an annual limit of Rs 50,000 per asset manager (mutual fund house), which means you may have to choose more than one. Lastly, when you withdraw or redeem funds, they will get electronically deposited in the linked bank account rather than the e-wallet.

Whichever, mode of investment you use, the important part is that you avoid leaving funds idle and invest while you earn rather than waiting till later. When income is irregular, the priority is to ensure that current earnings are utilized well even for your future. To do that you must embrace every option and maximise your ability to generate long term returns.