BENEFITS OF PUTTING YOUR MONEY IN A SIP
Systematic Investment Plans or SIP are a boon to those investors who cannot afford to invest the entire investment in one-go. That’s not it. If you invest your money in mutual funds via SIP, you do not have to worry about the volatilities, or the uncertainties associated with stock market. This is just the tip of the iceberg. An SIP investment has several other benefits. Before we dive into the benefits of SIP investment, let’s quickly recall what an SIP is.
What is SIP?
SIP is an investment tool that allows investors to invest their money in their desired mutual fund schemes on a regular basis. Under SIP investment, a fixed amount is deducted from an investor’s bank account for a fixed duration at regular intervals.
Benefits of putting your money in an SIP investment
Here are a few benefits of SIP investment that investors enjoy:
- Power of compounding
When you invest your money for a prolonged duration, your investments grow at their maximum potential. Also, your returns earn further returns due to the power of compounding. Thus, compounding allows your investments to earn significant returns when invested for a prolonged duration.
- Rupee cost averaging
When you invest in SIP, you end up investing in different market cycles – when the markets are soaring high and also when the markets are in a slump. So, an investor ends up with higher amount of mutual fund units when the markets are low than when the markets are soaring high. As a result, the total cost spent on buying mutual fund units gets averaged out. This concept is known as rupee cost averaging.
- Regular investing
As SIP investments are autonomous in nature, a pre-determined investment amount gets automatically deducted from the bank account of an investor at regular intervals. This ensures that an investor invests in mutual funds on a regular basis without fail. This inculcates the habit of financial discipline among investors.
- Friendly to an investor’s pockets
Unlike lumpsum investment, you do not have to go all out and invest a substantial investment amount in one go. As the investment amount is divided into several small, inconsiderable investment amounts, the burden on the investor to accumulate the amount decreases to a huge extent. An investor can invest as low as Rs 100 per month through SIP investments. Thus, SIP investments are investor friendly and light on the pocket of investors.
- No need to time the market
Unlike lumpsum investments, SIP investments do not require an individual to time the markets. Timing the market is not as easy as it sounds and experts usually frown over this concept. Though you might have heard the basic investment principle is to ‘buy low and sell high’, it is not as easy. SIP investments instead focus on the concept of time in the market – which means that one should rather focus on staying invested in the markets for a prolonged duration.
- Ease of investing
Investing in mutual funds via SIP is a seamless process. One can easily invest in mutual funds online via SIP at just a few clicks. Thus, you can invest in SIP from the comfort of your home.
Aren’t SIP investments just the best? Don’t take our word and find it out for yourself. Invest in SIP today to get a step closer to your financial goals. Happy investing!