SIP guide for students: Unlocking the potential of SIPs for long-term growth

SIP guide for students: Unlocking the potential of SIPs for long-term growth


As a student, you have a long investment horizon ahead of you. This gives you a huge advantage to create wealth for your future needs through the power of compounding. However, many students are unaware of how to leverage this time to their benefit. By starting Systematic Investment Plans or SIPs early in the right mutual funds and continuing them for the long run, students can build a large education fund, accumulate enough for a home down payment, and achieve other life goals.

Start early for maximum power of compounding

As a student, you have the benefit of time on your side. Starting an SIP at a young age will allow you to take maximum advantage of the power of compounding. Even a small monthly investment of Rs. 2,000-3,000 started while in college and continued till you turn 30 has the potential to grow into a sizable corpus for future needs like higher education, marriage or home down payment. Use an SIP calculator to see the difference starting early can make to your long-term wealth.

Choose equity funds for best returns

Equity or stock funds are the best choice for students to get high returns and stay ahead of inflation. Focus on diversified equity funds that invest in a large basket of stocks across sectors. They have the potential to generate annual returns of 12-15% over the long 20–25-year period that you have as a student. You can also consider balanced advantage funds that automatically switch between equity and debt. Use a fund comparison tool to analyze funds and choose the best performing ones for your SIPs.

Increase SIP amounts yearly with scholarships or stipends

While the initial amounts may be small, commit to increasing your SIPs by at least 10-15% each year with rising stipends or scholarships. This step-up will boost your investments with rising earning power. For example, if you start with Rs. 2,500 per month in the first year of college and increase by 15% each year, your monthly SIP will grow to over Rs. 40,000 by the time you are 30, resulting in a sizable education fund for future needs. Use an SIP step-up calculator to determine sustainable increase percentages each year.

Rebalance from equity to debt closer to goals

As you near your goals after college like higher education or home down payment, start rebalancing your SIPs from equity to debt funds each year to reduce risk. For example, if you have 80:20 equity: debt allocation during college years, make it 60:40 at age 27, 40:60 at 29 and 20:80 by age 30. Rebalancing helps lock in higher returns from equity during initial years and protects capital as needs come closer. Use an asset allocation calculator to determine suitable rebalancing each year.

Consider one-time investments from gifts or bonuses

In addition to regular SIPs from your income, invest any large one-time amounts you receive like gifts, scholarships or work bonuses into your mutual fund investments. One-time investments provide a boost to your corpus and reduce reliance on monthly SIPs. Assuming a 15% annual return, Rs. 1 lakh invested while in college has the potential to grow to over Rs. 11.5 lakh in 10 years and over Rs. 1 crore in 20 years. One-time investments started early can fund a large part of your future needs when goals come due.

Students have the most powerful wealth creation tool in their hand – time. Make the most of it by starting SIPs early in the right equity funds, increasing amounts periodically each year and rebalancing adequately closer to your goals. One-time investments provide an added advantage to make your money work harder for you. Use various calculators to plan and monitor your investments for the best long-term returns.


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