Have you set a big financial goal for yourself but do not have enough money to invest? The best way to approach the goal is through Systematic Investment Plans (SIP) where you can invest part of your monthly savings, even in small amounts, to achieve your long-term financial goals over a period of time. SIP is a process through which you invest a certain amount in predetermined periods to create huge wealth. It is also one of the most recommended modes of investing in mutual funds.
Here are 8 benefits why you should adopt the SIP route:
Pocket-friendly
It is an easy way to start your investment in mutual funds for a long term. One can start a systematic investment with just Rs 500 at a time. This makes mutual funds investing suitable for every kind of individual who may be earning more or less, irrespective of it, one can fulfil their financial goals very easily.
No need to time the market
The systematic plan makes your investment work through market cycles for better returns. Therefore, while doing investments through SIP's, understanding the market volatility during the initial stage can be avoided.
Helps achieve financial goals
Financial goals can be aligned very easily, whether it is the short-term or long term. Since investment can be done in any range through SIP mode, one can easily calculate the monthly need of investing money assuming a certain rate of returns as per the risk appetite of an individual and accordingly, one can make an investment in the desired mutual fund scheme which can help them achieve their goals in reality.
Power of compounding
The overall value of corpus multiplies over a period of time with interest earned on previous interest and principal. For example, if you invest Rs 10000 a month over a period of 20 years assuming an interest rate of 12%, you will be able to generate approximately Rs 1 crore by saving just Rs 24 lakh throughout the tenure.
Benefits novice investors
SIP has an inbuilt mechanism to mitigate risks. While entering into mutual funds investing for the first time, it is suggested as one of the best investment strategies to start your investment.
Inculcates financial discipline
Investing through SIP in building a disciplined approach by forcing to save and invest regularly. It helps you dedicate your savings towards a financial goal over a long period of time.
Good investing strategy for novice investors
Investors who are new to equity investing and also, who are risk-averse can go through this mode investing their money.
Flexibility in choosing and changing the date
You can easily change the date of periodic investment by simply intimating your fund house through the designated form. For say, if you want to change the date of auto deduction of your savings from your bank account, you can easily do it by signing and submitting the ECS (Electronic Clearing Service) form of same scheme in the respective AMC. The process ideally takes 30 days.
Cost Averaging
It helps in reducing market risk by buying units at different price points and averaging your cost. Through this method, you can accumulate more units over a period of time which helps in multiplying your wealth. However, you need to remain invested for a longer term.
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