Systematic Investment Plan (SIP) is one of the easiest and low-risk ways to invest in mutual funds. You can invest a fixed amount weekly, monthly or quarterly. This amount gets auto-deducted from your bank account via standing instructions and mutual fund units are allotted to you against it.
Let’s look at the benefits of making an SIP investment.
Since the SIP is a periodic investment, you can inculcate financial discipline in your life. It allows you to systematically build a significant corpus and wealth in the long term.
Low Investment Amount
You can start investing in mutual funds through SIP with an amount as low as Rs500. So, if you are financially stretched, a newly employed professional, a college-going student or a housewife, you can start SIP easily.
Choice of Mutual Fund Schemes
There are several SIP schemes available as per your investment objectives, risk appetite and time horizon. You can invest in equity, debt or hybrid SIPs. If your budget permits, you invest in more than one scheme at a time. You can even use an online SIP goal calculator
to get an estimate of potential returns and principal maturity amount on each scheme.
SIPs are managed professionally by fund managers just like other mutual fund schemes. These fund managers leverage their experience and market expertise to research the best SIP schemes and stocks for you. You can rest assured of complete transparency of your SIP transactions.
Rupee Cost Averaging
You can purchase more units when the market is underperforming and fewer units when markets are on an upswing. So, SIPs average out the cost of purchase through rupee cost averaging over time.
SIP allows you to reinvest the interest on the principal amount. If you continue SIP for 7-10 years or more or till maturity, then your money gets more time to grow. This way, the power of compounding gives you higher returns in the long run.
You can increase the SIP amount anytime till maturity if there is an increase in your income or you have received unexpected money such as bonuses or cash gifts. Similarly, if you are facing a cash crunch, you can discontinue the SIP instalment and then restart it at your convenience. In the meantime, the SIP investment will continue to earn returns even without fresh instalment.
Protection Against Emotional Investing
When you invest a lump sum amount, your decision may be based on emotional investing. You might want to take advantage of the market timing which may not always turn in your
favour. Since SIP investment takes place at regular intervals, irrespective of market ups and downs, it safeguards you against making emotional investment decisions.
If you are looking for a professional financial services platform to handhold your SIP investment, then you can connect with Ajmera x-change. We can help you to invest in SIPs
smartly and amass a significant corpus over time. You can even use our user-friendly online SIP investment calculator
to plan your SIPs.