A systematic investment plan or SIP is a specialized form of investing money in mutual funds. In such an investment, investors do not invest a lump sum amount on schemes, but instead, invest smaller sums at regular intervals of time over a fixed duration. Unlike regular mutual fund investments, where you need to invest a substantial amount of money to get decent returns, SIP investments can be started with limited funds.
Here is a look at a few reasons why investments through systematic investment plans are beneficial for you.
- The importance of saving
In SIP investment, the money from your savings account is used for investments. If you have opted for a monthly SIP, a specific sum of money will be deducted from your savings account each month. Therefore, not only will you be encouraged to save money for the SIP payments, but also your savings will start earning you even more money in the long run.
- Rupee-cost averaging
In ordinary investments, you would have to time the market precisely, so as not to incur losses on the invested sum. However, with the rupee-cost averaging concept in SIP investments, you do not need to time the market. In the case of a declining market, your money would be used to buy more units. Similarly, for an improving market, few shares are bought. This is possible due to the periodic investment of money, instead of a lump sum investment. Systematic investment plans do not guarantee a profit on the investment but limit the risk greatly.
- A convenient process of investment
Unlike other investment procedures, a SIP investment is very simple to follow. You can start investing in just three simple steps, in case of a SIP. Here is a look at what those steps are-
- Register for the SIP investment online.
- In the website, fill up all the necessary details, such as name and bank account details.
- Ensure that you have the funds available for the investment in your bank while completing these steps.
- Disciplined investing
Investment in SIPs will inculcate the habit of saving on a regular basis, which is essential if you want to be a successful investor. Systematic investing will help you stick to a budget and is often more profitable than investing a large sum of money at once.
- SIPs are affordable for all
Unlike other investment procedures, where you might need to pay a charge at the start of the investment, SIP investments are completely free of any additional charges. Furthermore, investors are free to start their investments with an amount as low as Rs. 500 each month.
Therefore, if you are considering investments, start with SIPs, as they will help you achieve your investment objectives.
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