Systematic Investment Plan is a way of investing your money in mutual funds where one chooses a mutual fund scheme that suits their goals and then invests a fixed amount at regular periods. In other words, it is a less riskier way to invest at your own pace when you are able to rather than investing a large sum at one single time. The best part of SIPs is that the value of the monthly instalments can be increased or decreased whenever needed plus you can stop a payment if the money is needed elsewhere. Below are some of the other reasons why you should invest in sip plans.
Invest In Small Amounts
People can start off with small investment payments as little as INR 500 per month into mutual funds with SIP investment plans. This method of investing means that everyone can now enjoy the benefits of the share market even if they don’t have a large savings. The great part about SIP investments is that it is done at the pace you set.
Stop the SIP Anytime
The great part about SIP plans is that you will not be penalised if you decide to stop. This is the reason people prefer SIP investing in mutual funds in comparison to recurring deposits. With RD’s you will most certainly get fined which does not exist with SIP’s. When you stop the SIP plan, you have two choices – either get the money you invested back or choose to keep the funds to be reinvested in the mutual funds.
More Responsible With Savings
Alot of people’s general issue with being unable to invest is because their expenditures do not allow them to. For most people it is common to spend more when they earn more. However with the date of an SIP investment set to be deducted right after you receive your salary, there is no question of spending it since it will already be invested.
No Need To Depend On Market Timing
When you use this form of investment, you don’t need to worry if the market is up or down. Mutual Funds work on the number of units of the fund you buy. Rupee Cost Averaging takes place in mutual funds when you buy more units during a low market and less units in a high market. This form of balancing out the cost ensures that investors don’t have to rely on timing their investments according to the market.
Benefit From The Power Of Compounding
A monthly investment with SIP’s will generate a monthly return which is then added to the initial invested amount and then reinvested. So as time goes by, your investment enjoys the benefits of compounding effect with the initial investment and returns earned from them.
SIPs or Systematic Investment Plans exist to shield investors from many problems like short term risks, market volatility, impulsive decisions or overspending. Any form of investment will always come with their own risks and benefits but SIP’s into mutual funds are generally considered one of the safest and easiest ways to invest in India.