SIP AND MUTUAL FUNDS – WHAT IS SIP, BEST SIP PLANS AND BENEFITS; EXPERT ANSWERS ALL FOR YOU

Have you being eyeing on the latest model of the Iphone? Or maybe you wish to buy the latest bike? Or maybe you want to build your dream house? Whatever your dream maybe, SIPs can help you realise those dreams. This article focuses on everything you as an investor might need to know about SIPs or Systematic Investment Plan, before you invest your hard-earned money through them.

What is an SIP?

SIP is a godsend avenue to those who wish to grow their wealth in a systematic and disciplined manner without parking too much of their savings at ay point of time in a single fund or asset class. In simple terms, SIP is simply a way to invest in your hard-earned money in mutual funds. Under this mode of investment, regular and systematic investments are made towards desired mutual fund schemes at regular intervals for a fixed duration of time. At the time interval specified by an investor, a specified amount gets deducted from the investor’s bank account on a regular basis which is used to buy units of the mutual fund schemes at the prevailing NAV of the fund.

Best SIP plans

You do not invest in SIP. Rather, you invest in mutual funds via SIP. Hence, there’s no concept of best SIP plans. When you invest you money through SIP, you look for different types of mutual funds. Choose a mutual fund that best aligns with your investment portfolio.

Benefits of investing in SIP mutual funds

There are several advantages of investing your money in mutual funds through SIP mode of investment. Let’s look at some of the benefits of investing in SIP mutual fund:

  1. Timing the market

Unlike lumpsum mode of investment, you do not have to worry about entering the markets at the right time to earn sizeable returns. This is because when you a invest a significant amount of money in one go, there’s a possibility that you may attract alarming returns if the market crashes. However, with SIP, the need to time the market just vanishes away. This is because with SIP, your investments are spread across several time periods. Thus, only a small portion of your investment is exposed to volatilities and instabilities in the market.

  1. Rupee cost averaging
    Here’s what we mean by rupee cost averaging – SIP investments ensure that your money is invested across different market cycles. As a result, one ends up with higher units of mutual units at low price when the markets are down and vice versa. This averages out the total cost of buying mutual fund units.
  2. Power of compounding
    SIPs allow investors to benefit from the concept of power of compounding. Under compounding, your money is reinvested in hope to earn higher returns. As SIPs allow you to invest even with a small amount of money, you begin investing in mutual funds much earlier than you would have had you gone with lumpsum mode of investment. This ensures that you stay invested for a longer duration. And as you know, the longer you hold on to your investments, the greater would be the benefits you’d reap on maturity.
  3. Disciplined mode of investment
    As SIPs ensure regular and systematic investments in mutual funds, it inculcates a sense of investment discipline among investors. Financial or investment discipline is important in the world of investing.
  4. Light on your pocket
    SIPs debunk one of the most common myth associated with investments in mutual funds. You need to have a sizeable corpus to invest in mutual funds. Wrong. You need to have just Rs 100 per month to invest in mutual funds via SIP.

Hope this clears your doubts regarding SIP investments and encourages you to invest in mutual funds via SIP. So, go invest in SIP today. Because, remember, time lost is a lost opportunity to create wealth. Happy investing!