SIP or Systematic Investment Plan is gaining popularity for last few years. More and more people are joining the SIP club It is a tool that allows investors to invest a fixed sum of money regularly in mutual fund schemes for a short or long duration, based on their investment plans. The money can be invested weekly, monthly or quarterly based on your convenience. This tool allows you to invest an amount as small as Rs. 500 per month and increase it over time.
Why should you invest through SIP?
There are many benefits of investing through SIP. We’ve listed down a few below. Let us have a look at these:
- Investing through SIPs brings a financial discipline to your life. This allows you to build a habit to invest regularly over a long period
- SIPs offer flexibility in your investment plans. You can choose an amount you are comfortable with, a period you want to select and the kind of plan you want to invest in. You can start investing with a small amount of Rs. 500
- SIPs offer the power of compounding for your returns. When you keep investing over a long period, you earn returns on the returns earned by your investment. This helps you to build a large sum to meet your long-term financial goals with regular small investments. For example, if you start investing only Rs 1,000 every month in an equity scheme for next 10 years and your investment generates 12 per cent returns you’d get Rs 2,32,339, for the total amount of 1,20,000 invested by you, at the end of 10 years.
- The money you invest through SIPs is managed by Fund Managers who keep a constant eye on the market ups and downs and manage your money. So, there is no need for you to think about market situations. Someone else is doing it for you. Awesome, isn’t it?
- Saves time and keeps you stress free
- There is a financial emergency, SIPs give you the freedom to exit, whenever you want
While SIPs offer all these benefits, what you need to remember is that such investment tools work the best when you start early and stay invested for a longer period. Patience and consistency pays in the long run, especially when we start investing a small amount of money.
Happy Investing…
Disclaimer: Mutual Fund investments are subject to market risks, read all scheme related documents carefully