A Systematic Investment Plan or SIP is a smart financial planning tool that helps you to invest money in mutual funds in a convenient and hassle free manner. It is a planned investment approach, wherein you invest a small amount of money every month. It helps to inculcate a habit of disciplined financial saving and build wealth for the future.
An SIP investment plan provides you higher returns and thus proves to be a better investment avenue. In this article, we are including top five reasons to consider investing in SIPs.
Disciplined Approach to Investing
Investing in SIPs requires you to invest a fixed amount on a regular monthly basis that helps inculcate a habit of regular investment. The amount that you need to invest is as low as Rs 500 to 1000 per month. The major advantage is investing a small amount every month would not feel like any financial burden on your pocket.
Accomplish Financial Goals
An SIP investment helps you to build a corpus and in order to achieve this objective, you need to make regular monthly investments over a period of time. It also helps you to fulfill long-term goals such as buying a home, retirement planning, children’s education, etc.
Investment in SIPs does not have any lock-in period, so you have the option to withdraw the amount completely from the SIP anytime you need it.
Make the most from Power of Compounding
When you make regular investment in SIPs for a longer time, you can enjoy the benefit of compounding that ensures higher returns. Even, if you start investing Rs 500 or Rs 1000 per month over a longer term, you can easily create wealth. It is also an ideal investment option for young investors.
Minimize the risk of equity market volatility
By investment in an SIP through a periodic investment in equities, you can easily go through the ups and downs of the equity market. When the stock market goes up, the investment amount buys fewer shares and at time the market goes down, you buy more shares. In a long-term investment, you can minimize the risk of stock market volatility, resulting there is no need to time the market.
Benefit of Diversification
When it comes to investment, it’s always a good idea to make investment well diversified. Most experts believe in investing across eight to ten sectors. Investing in SIPs helps you to enjoy the benefits of diversification that make the risk spread out and get higher returns as well.
An SIP investment plan helps you to build wealth by investing regularly in mutual funds over a period of time. It helps you to generate inflation-adjusted returns with the lesser risk involved. You only need to choose the right type of mutual fund, which can help you to fulfill your financial goals. Investing in an SIP is quite convenient, as you can register for an SIP online and start investing at the click of your mouse.