Honest wealth creation through a Systematic Investment Plan (SIP) has a formula! Mutual Funds help you in wealth creation by adding dividend or gains to the principal amount, which results in a large amount at the end of investment period. The compound interest is added to the principal of a deposit and the added interest again earns an interest.

Following are a few points which will help you get more profits through an SIP (Systematic Investment Plan):

Invest early

To make most of compounding in an SIP, one must follow the golden rule of investing that is beginning early. This is because of fact that longer the investment cycle is, bigger will be the returns in the end.

Keep the investments for long time
The longer the period of investment is, more the chance to increase the gain is. It is due to dividend that someone receives on the current sum of money, which is higher, the longer you invest.

Invest regularly

SIP can give great returns on the wealth of investors who have a regular monthly income and cannot make lump sum investments. SIP is suitable for first time investors and for investors those who invest in equities due to market volatility and risk.

Cost averaging

One of the most important benefits of an SIP is cost averaging. The amount invested is fixed for an SIP; hence the number of units purchased for it in the market will be high and vice versa. Therefore, the average cost of a unit is reduced which in turn benefits the investor.     

Conclusively, compounding and SIP can benefit you the most if you begin investing early, keep investments for long time and invest in a regular and disciplined way. By following these steps, your principle will keep growing and will earn you a larger amount at the end of the investment period.

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Fixed deposits have always been popular due to the safety of capital and confirmed returns. The high interest rates which the FDs are earning in past few years have further increased the popularity of fixed deposit investment.

Here’s a piece of advise: It would be better to lock in your money in long term fixed deposits since RBI has cut repo rate and cash reserve ratio several times.

A few tips to increase returns in fixed deposits may come in handy:

Split your FDs
It is usually better to split your Rs. 5 lakh fixed deposit investment into five FDs worth Rs. 1 lakh each in various banks, since fixed deposits which accumulate up to Rs. 1 lakh are backed by deposit insurance.

Ladder your investment

The biggest risk that even the best fixed deposit scheme in India faces is the risk of your money being locked up for a long tenure at a low rate of return. To counter this, ladder your amount available for investment into smaller amounts. So, the first fixed deposit should be for one year, second for two years and so on.

Invest in a Public Sector Bank

Public sector banks offer a higher return on fixed deposits than private banks. So, one can get higher returns accompanied with more safety and security.

Avoid tax on your final amount

The interest earned through fixed deposits is not tax-free. The interest income from FDs up till Rs. 10,000 is exempt from tax. This tax can be avoided again if you break the total FD amount and invest smaller FDs in different banks.

RBI is likely to continue rate cuts in the coming fiscal year. So, the medium and long term fixed deposit investments will see larger positive return and not the short-term fixed deposits. Also by keeping these points in mind, one can increase the interests for fixed deposit for any term. 

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During the current financial year, tax free bonds have received overwhelming response from investors. Even the Bollywood could not resist investing due to the attractive benefits. Film stars like Akshay Kumar, Aamir Khan and Kareena Kapoor Khan invested in IRFC Bonds, while Ranbir Kapoor and Aishwarya Rai Bachchan parked their money in NHAI Bonds. If you have not yet invested and wondering what makes this investment avenue such an attractive option, let me introduce you with these government bonds.

As the name suggests, Tax-free Bonds are financial instruments which offer Tax relief to the investors by way of exemptions in Income Tax. These bonds have emerged as a popular choice among investors due to the taxation benefit it offers. Tax-free bonds are generally issued by government enterprises and have a fixed interest rate. As the proceeds from the bonds are invested in infrastructure projects, they have a long-term maturity of typically 10, 15 or 20 years. Being liquid, these bonds are tradable in the secondary market and are listed on exchanges. They carry credit ratings from one of the rating agencies approved by SEBI as well as Reserve Bank of India (RBI).

For the financial year 2015-16, government of India authorized state owned entities to raise Rs. 40,000 Crore through tax free bonds. Most of the bonds got over subscribed on the very first day of issue opening. While a major portion of authorized amount has been reached by these entities but to complete their allocation limit, some of them are coming up with second round of issue. This is definitely a golden opportunity for investors who missed it during the first phase.

In the month of February and March these issues are expected to arrive:

Note: Issue dates have not yet been disclosed by the entities. The above mentioned dates are tentative and may or may not change.

These bonds are completely tax free but capital gains made on selling of tax-free bonds on stock exchanges are taxed. If the holding period is less than 12 months, capital gains on sale of tax-free bonds on stock exchanges are taxed as per the tax slab of the investor. If bonds are held for more than 12 months, the gains are taxed at 10 per cent.

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When you listen to agents, you naturally become too intimidated by all the figures, financial laws, and theories that they rattle off. So, you are not sure how to invest in mutual funds in India, or whether you should simply stick with a bank Fixed Deposit (FD).

Don’t get confused with all the data flying around. Simplify, and you’ll find that there are certain basic points that easily cut through all the financial jargon, so that you get the information that you really want. What you really want to know about a mutual fund is:

● What is the return on it

Higher the risk, greater the returns. Usually, the risk diminishes from Equity to Hybrid to Debt type of mutual funds. Consider the historical performance of a fund, and the returns that the fund manager has generated for other mutual funds he has managed.

● What is the tax status

You must also check what are the tax exemptions available or, what are the tax liabilities arising from investing in your chosen mutual fund.

● What are the fees & charges

Entry loads, exit loads, switching charges and other sundry deductions by the mutual fund could completely gobble up your gains, if you’re not watchful.

With that, you know how to assess your chosen mutual fund. Use the same criteria to compare mutual fund performance before deciding where to invest your hard-earned money.

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Two investment dilemmas bother every enlightened investor: How much to allocate for the future in the best case scenario, and in the worst-case one. To be blunt, the question is: “How to make sure that my family lives happily -- with me and after me?”

In the worst case scenario, you are looking for insurance. And that means you need the guidance of a Human Life Value Calculator. It’s a simple online tool. Just enter these details:

● Annual household expenses

● Annual income

● The number of years your family should get an income

● Expected rate of inflation

● Expected returns

● Outstanding liabilities

● Current investments and assets

● Current value of insurance

The Human Life Value Calculator then calculates your net worth, how much income your dependents will need and consequently, how much insurance you have to take on.

But let’s look at the brighter side now. What are the regular instalments that you need to pay to invest in mutual funds? Systematic Investment Planning or SIP is proven to give great returns that will one day bring your dreams to fruition.

Utilise the helpful SIP Return Calculator India mutual funds offer. Enter these details:

● Your regular investment amount

● The frequency of investment

● The number of years of investment

● The expected annualised returns

Press the ‘Calculate’ button to find out how much you have invested, and how much will you get on maturity.

Your dreams and your family are under a safety net now. Congratulations!

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