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2 mins Read | 5 Months Ago

Tips for Maximizing Returns on Mutual Fund SIP - ICICI

High dividend-paying stocks & Mutual Fund schemes

Systematic Investment Plan (SIP) is a popular and disciplined way to invest in Mutual Funds. While SIPs offer the benefit of regular investing, strategic thinking is required to maximise returns on your SIP investments. Let us look at some valuable tips and insights that can help you to maximise your SIP investments and achieve your financial goals.

1. Start early

The power of compounding works best when you start early. Even small, regular investments can grow significantly over time. By starting your SIP early, you can benefit from the full potential of compounding and build a substantial corpus for your future.

2. Be consistent

Consistency is the key to SIP success. Stick to your SIP schedule and contribute regularly. Avoid skipping or discontinuing your SIP investments unless necessary. Consistent investments ensure that you benefit from the Rupee-Cost Averaging and reduce the impact of market volatility.

3. Choose the right fund

Selecting the right Mutual Fund scheme is crucial. Before choosing a fund, assess your financial goal, risk tolerance and investment horizon. Equity Funds may offer higher returns over the long term, while Debt Funds provide stability. Consider diversifying your portfolio with a mix of Equity and Debt Funds for a balanced growth.

4. Increase SIP amount over time

As your income grows, consider increasing your SIP amount. This practice allows you to boost your investments without straining your finances. Gradually increasing your SIP contributions can increase your wealth accumulation.

5. Stay informed

Keep yourself updated on SIP investments and the market. Monitor the performance of your chosen funds and review your portfolio periodically. Stay informed about any changes in your fund's objectives or management.

6. Avoid frequent changes

While staying informed is essential, avoid making frequent changes to your SIP portfolio. Frequent switching between funds can lead to higher expenses and hinder your returns. Stick to your investment strategy and make changes only when there is a significant change in your financial goal or risk tolerance level.

7. Reinvest dividends

If your SIP fund provides dividends, consider reinvesting them instead of taking them in cash. Reinvested dividends can enhance the power of compounding and help your wealth grow more effectively.

8. Use Top-up SIPs

Many fund houses offer Top-up SIP options. You can increase your SIP amount annually or semi-annually to account for inflation and rising expenses. Top-up SIPs help you maintain the purchasing power of your investments.

By implementing these tips, you can maximise returns on your SIP investments and work towards achieving your financial objectives. SIPs provide a disciplined and effective way to create wealth over time and with the right approach you can make the most out of this investment strategy. Consistency, patience and informed decisions are the cornerstones of SIP success.

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