Optimise your short-term goals with a 3-year SIP investment plan

Are you waiting to save up a large sum of money to start investing? Why wait, when a Systematic Investment Plan (SIP) can be a smarter, more affordable alternative?

SIPs enable you to invest small, fixed amounts regularly into a mutual fund scheme of your choice, thus allowing you to participate in the market without requiring a large initial investment. Over time, they can potentially build significant wealth. For short or medium-term goals, too, SIPs can be beneficial. For instance, you can even opt for a SIP 3 year plan for financial goals such as saving for a large purchase, financing a down payment, or maintaining an emergency corpus.

This article explores the possible uses of a three-year SIP. Whether you’re new to investing or seeking a focused financial strategy, SIPs can help you to achieve your goals efficiently and conveniently.

• Table of contents

• 3-years SIP Plan: An overview
• Tips for choosing a suitable SIP for 3 years
• Key considerations when selecting a 3-year SIP plan
• Advantages of investing in 3-year SIP plans
• 3-Year SIP plans by Bajaj Finserv AMC
• Steps to start investing in SIP
• Visit the fund house’s website

3-years SIP Plan: An overview

Investing in an SIP involves committing a fixed amount at regular intervals. Here are some of its key features:

Rupee cost averaging: By investing consistently, you can average out the cost of acquiring units, mitigating the impact of short-term market volatility.

Return potential: While not as beneficial as longer-term investments of 10+ years, an SIP for three years can potentially outperform traditional savings instruments.

Diversification: Mutual funds invest in a wide range of securities, creating a diversified portfolio that mitigates risk. Some funds also invest in different asset classes (such as stocks, bonds, etc) for a more optimal balance between risk and reward.

Tips for choosing a suitable SIP for 3 years

To optimise the potential of SIPs in three years, consider these tips:

Choose the right fund: An equity fund offers high growth potential over time but can be very risky. A three-year SIP in such a fund, therefore, will only be beneficial if market conditions are favourable, which can never be predicted. Hence, debt mutual funds, which are relatively stable, or hybrid funds that invest in stocks as well as debt securities, may be more suitable for such a tenure. Within hybrid funds too, those that are equity-heavy may be more suitable for four-five years or more.

Set clear goals: Identify your financial objectives, such as a down payment, a large purchase, home renovations, a holiday or more.

Assess risk appetite: For short-term investments, moderate to low-risk funds like balanced or debt-oriented SIPs may be suitable.

Review fund performance: Look at the mutual fund's historical performance over at least 5–10 years to evaluate consistency.

Consult a financial advisor: Seek expert guidance to match your financial goals with the right mutual fund SIP plan.

Use an SIP calculator: A SIP calculator can help you identify the investment amount that can potentially help you reach your goals. All you need to do is enter your planned investment amount, tenure and expected rate of return. The calculator estimates the potential value of your final corpus.

For instance, let’s say you want to save money for a down payment on a car. On the tool, you can input the amount you plan to save. For this example, let’s consider a monthly investment of Rs. 5,000 and an expected return rate of 7%. Using the tool, you can see that your final corpus can potentially amount to Rs 2,00,815.

If this is not enough for your goal, you can input different investment amounts to find a suitable one.

Key considerations when selecting a 3-year SIP plan

Understand your risk tolerance: Assess how much risk you are willing to take. If you prefer relative stability, opt for debt or conservative hybrid mutual funds. For higher return potential, you can consider equity-focused funds but be prepared to handle market volatility and potential short-term losses.

Evaluate fund performance: While past performance isn’t a guarantee of future results, it provides insights into the fund’s investment approach. Look at different market conditions and time horizons for a more holistic picture.

Check the expense ratio: The expense ratio, which includes management and operational costs, affects your net returns.

Review the fund manager’s track record: The fund manager plays a vital role in a fund's performance. Research their experience, expertise, and their track record to ensure your investment is in capable hands.

Advantages of investing in 3-year SIP plans

Builds a habit of consistent investing: SIPs make investing easy and automatic. You commit a fixed amount regularly, such as every month, ensuring you stay consistent. This removes the stress of deciding when to invest and keeps you focused on your financial goals without being distracted by market ups and downs.

Mitigates impact market fluctuations: SIPs use a method called rupee cost averaging. This means you buy more units when prices are low and fewer when prices are high. Over time, this can help reduce the overall per-unit cost of the investment.

Flexible and accessible funds: Many mutual funds offer high liquidity, meaning that you can redeem units at any time. There may be a nominal exit load for a certain period (such as a year), so be sure to check that.

3-Year SIP plans by Bajaj Finserv AMC

Here are some schemes offered by Bajaj Finserv AMC. Their suitability will depend upon an investor’s risk appetite, investment horizon and goals. Typically, debt-oriented funds are recommended for short-term goals and equity-oriented funds for longer-term goals. You can see the full list of schemes offered by Bajaj Finserv Mutual Fund here.

	Minimum SIP amount
Bajaj Finserv Flexi Cap Fund	₹500	Invest Now
Bajaj Finserv Large Cap Fund	₹500	Invest Now
Bajaj Finserv Large and Mid Cap Fund	₹500	Invest Now
Bajaj Finserv Balanced Advantage Fund	₹500	Invest Now
Bajaj Finserv Multi Asset Allocation Fund	₹500	Invest Now

Steps to start investing in SIP

Step 1: Complete your know your customer (KYC) formalities

To invest in mutual funds, including through an SIP, you must first comply with KYC requirements. Here's how you can complete this process:

Gather necessary documents

• PAN card: Your primary identification for financial transactions.
• Proof of address: This could be your Aadhaar card, passport, voter ID, utility bill, or driving license.
• Passport-size photograph:A recent photograph for identification purposes.
• Bank details: A chequebook to provide your bank account information.

Begin the KYC process

• Start by visiting the official website of a fund house or a registrar and transfer agent offering eKYC services.
• Fill out the online form with your basic details, including name, date of birth, and contact information.
• Upload digital copies of your PAN card, address proof, and photograph.
• Enter your Aadhaar number and verify it using the one-time password (OTP) sent to your registered mobile number.

Note: Aadhaar-based KYC limits your annual investment to Rs. 50,000. If you wish to exceed this amount, additional PAN card details are required.

Once KYC compliance is completed, you can invest in any mutual fund scheme from any fund house without repeating the KYC process.

Step 2: Register for an SIP

After completing your KYC, the next step is registering for an SIP in a mutual fund scheme of your choice. Follow these steps:

Visit the fund house’s website

Navigate to the official website of the mutual fund company offering your desired scheme.

Create an account

• Look for an option like "New Investor" or "Register Now."
• Fill out the application form with your personal and contact details.
• Provide bank details
• Ensure the account has sufficient funds to support automatic debits for your SIP instalments
• Confirm registration

Once your registration is complete and confirmed by the fund house, you are ready to start investing.

Conclusion

A 3-year SIP plan can help investors with some short-term goals. It offers a disciplined, affordable, flexible, and professionally managed investment approach with the potential for reasonable returns. By carefully selecting a suitable plan and following the steps to invest, you can potentially work effectively towards your goals. It is recommended that you also consult a financial expert for expert guidance and tailored advice.

FAQ:

What are the tax implications for 3-year SIPs?

Any returns earned from mutual funds are subject to capital gains tax. The amount of tax you need to pay depends on how long you hold the investment (holding period) and the type of mutual fund invested in.

For equity-oriented funds, units held for more than 1 year are subject to a long-term capital gains tax of 12.5%. However, capital gains of up to Rs. 1.25 lakh are tax-exempt. Short-term capital gains are taxed at 20%, with no exemptions. For debt mutual funds, capital gains are taxed as per the investor’s prevailing tax slab, regardless of the holding period.

Additionally, if you invest in the Equity Linked Savings Schemes (ELSS), you can claim tax deductions under Section 80C of the Income Tax Act.

Can I withdraw my SIP investment before 3 years?

Yes, but terms vary: some funds may have an exit load if withdrawn early. Equity Linked Saving Schemes (ELSS) have a mandatory 3-year lock-in.

What is the minimum investment for a 3-year SIP?

The minimum investment amount depends on the mutual fund scheme you choose. Most mutual funds allow you to start with Rs. 500 or Rs. 1,000 per month, making SIPs accessible to everyone. However, some schemes may have higher or lower minimum requirements, so it’s essential to check with the fund provider before starting.

What potential returns can I expect from an SIP in 3 years?

The potential returns depend upon the scheme category as well as market conditions. Generally, equity schemes have the potential to offer better returns than debt funds but can experience significant short-term volatility. You can refer to three-year returns of a specific scheme category over different market cycles to get a tentative idea. However, past performance may or may not be sustained in the future, and actual returns will depend on market conditions.

How much will my investment grow if I invest Rs. 3,000 monthly in SIP for 3 years?

Again, this depends upon the market conditions and the scheme category. An SIP calculator can help you get a tentative idea of the potential returns based on your investment amount, tenure and expected returns. For instance, let’s assume you plan to invest a monthly Rs. 3,000 SIP in a short duration fund for three years, where you expect an average annualised return of 7%. The calculator will show you that you would have invested a total Rs. 1,08,000 and potentially earned Rs. 12,489, taking your corpus to Rs. 1,20,489. However, it is essential to remember that the calculator’s estimates are based on your inputs and there is no assurance that returns will be achieved or will be along expected lines.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully. This document should not be treated as endorsement of the views/opinions or as investment advice. This document should not be construed as a research report or a recommendation to buy or sell any security. This document is for information purpose only and should not be construed as a promise on minimum returns or safeguard of capital. This document alone is not sufficient and should not be used for the development or implementation of an investment strategy. The recipient should note and understand that the information provided above may not contain all the material aspects relevant for making an investment decision. Investors are advised to consult their own investment advisor before making any investment decision in light of their risk appetite, investment goals and horizon. This information is subject to change without any prior notice.