Fulfilment of financial goals needs meticulous planning and painstaking effort. You can start saving even if you don’t have a hefty amount to spare. SIP offers you a chance to make an investment in instalments, in a way that doesn’t affect your regular spending habits.
If you are jittery about making a huge investment but still plan to save money, SIP presents you with a convenient opportunity to do so. Systematic Investment Plan (SIP) involves regular payments of amounts as low as 500 rupees. By making scheduled investments through SIP, you can enjoy the benefits of your choice of mutual fund schemes.
Here are five reasons why investing in SIP makes absolute sense
- Imposition of Financial Structure: A regular monthly, quarterly, or yearly payment means that you make a commitment towards saving. Automated payments ensure that you stay dedicated to the SIP plan. This can enforce a certain discipline in your spending patterns. Goal-based SIP planning can help you strategize well towards your ambitions in life. It also encourages you to think ahead about where you want to be financially in the future.
- Customizable SIP Payments and Schedules: The rigidity of the mutual fund schemes is what scares new investors away. SIP, on the other hand, gives the convenience of choosing how much you want to pay, and when it is comfortable for you to make the payments. You can start with a small amount and increase your regular payments as per your financial situation. This flexibility is the key feature that adds to the allure of SIP.
You can also choose how long you want to invest in the fund schemes through SIP. Although long-term investments can have more benefits, SIP can also be helpful in achieving your short-term goals like higher education or international holidays.
- Lesser Impact of Market Fluctuations on Your Investment: The volatility of the markets can be bad news if you have made a lumpsum investment in the wrong fund scheme. By making investments periodically, the effect of market fluctuations on your finances can be mitigated.
With SIP, you make small, regular payments irrespective of market behaviour. This relieves you of the need to constantly fret about market variations.
- Rupee Cost Averaging: When the market is down, you get more units for your money while you get lesser units when the markets rise. This is called rupee cost averaging, which evens out the cost of each unit in the long term. Since the purchase period is spread out over a long period of time, it reduces risks related to market cycles to a great extent.
- Cumulative Effect of Compounding: It is no secret that the earlier you start saving, the better your financial health will be. The compounding benefits of SIP can do wonders for the wealth you get to accumulate over time. SIP is an effective tool to gather substantial capital by making small payments regularly over an extended period. Since your returns also start earning and give further returns, the cumulative effect of SIP Investments can build up a sizeable corpus at maturity.
SIP is a low-risk investment which helps regulate your financial planning. The automated nature of the investment eliminates the need to watch the markets continuously. The flexibility of SIP plans is a winsome feature that draws many into the world of investment and subsequent savings.