Are you one of those investors who is petrified at the thought of market volatility? Then Systematic Investment Plan, also known as SIP is the right investment product for you.
What is SIP?
SIP is a tool to invest in mutual funds. Under the SIP investment, an investor invests a fixed amount at predetermined intervals for a specific period of time in their preferred mutual fund schemes. The periodicity of the intervals can be daily, weekly, monthly, semi-annually, annually, etc. The SIP approach permits you to take your savings, be it big or small, and grow them in a way that it multiplies over time.
But, what is the power of SIP?
Individuals invest in SIP for the variety of advantages it provides to the investors. Let’s look at a few advantages offered by SIP investments:
- Power of compounding
When you stay invested for a long duration, you are benefitted from the power of compounding, also known as the eighth wonder of the world. Compounding enables to accumulate a higher corpus over time. Compounding ensures that your returns on mutual fund investments further accumulates more returns. Hence, to be fully benefitted from the compounding effect, it is always advised to invest at an early age.
- Rupee cost averaging
One of the biggest rewards of investments via SIP is rupee cost averaging. Under the SIP scheme, investments towards mutual funds are made irrespective of the market conditions. This allows the fund to acquire more units when the markets are low and lesser units when the markets are high. This averages out the total cost of mutual fund units and help to reduce the overall cost as the instalments increase. As a result, an investor earns higher returns on their total principal amount at the time of exit.
- Disciplined investing
To meet your financial goals without a hiccup down the road, it’s essential to ensure financial discipline. Since SIPs are automated in nature, they instil a sense of disciplined investing among investors. Under SIP, your investment is not dependent on your ability and willingness. Further, investments in SIP ensure that you do not exit the market during market corrections. Hence, a disciplined mode of investment is crucial to meet your long-term financial goals.
- Pocket friendly
It is not always possible for investors to arrange the entire investment amount in one go. Since SIP mode allows you to invest in mutual funds periodically, they are quite friendly on the pockets of the investor. An investor can invest as low as Rs500 per month in SIPs.
The power of SIP is huge. What’s more, an investor can also anticipate the returns on their SIP investments using an SIP calculator. A mutual funds SIP calculator helps you to understand the investment amount to be invested in meeting your future goals in a given time frame. Happy investing!