Benefits of SIP Investments

Systematic Investment Plans (SIPs) in mutual funds allow investors to invest a specific amount of money in mutual funds on a regular basis. The most popular type of SIP is the monthly SIP, which invests a set amount of money in the mutual fund of your choice on a specific date each month. Also bear in mind that while the SIP amount is fixed, the NAV (Net Asset Value) of mutual fund units changes every day, so you may end up buying a different number of units with a SIP transaction.

Typical Benefits of Systematic Investment:

Rupee Cost Averaging

Rupee cost averaging is a concept in which you purchase more units when a fund's Net Asset Value (NAV) is low and less units when NAV is high. In general, this SIP benefit makes sure that the price of buying mutual fund units averages out over the term of the SIP. One of the major benefits of SIP investments is that you do not have to worry about trying to time the market if you are investing through SIP.

Benefits of SIP Mutual Funds

Power of Compounding

Compounding occurs when the returns on your investments begin to earn returns. Although it is a simple idea, there are many practical implications. Your returns can be reinvested when you make regular investments through SIPs. The potential profits multiply as time goes on due to a snowball effect that results from this. Investing for a long time is the best strategy for maximizing the reward. This is another advantage of SIP, where you benefit from investing as soon as possible.

Flexible Investment Amount

You can opt to invest in mutual funds through SIP with as little as Rs 500 each month, which is one of the major benefits of SIP versus lump sum investments. This is a realistic approach to put money aside each month without costing a fortune. With an increase in your income, you may also use the Systematic Investment Plan step-up feature to increase the number of regular investments. There is also no restriction on the number of mutual funds or SIPs you can invest in concurrently. The SIP investment plan can help you achieve financial goals more quickly in this manner.

Disciplined Savings

Systematic Investment Plans involve making consistent, typically monthly, investments into a mutual fund of your choosing. By continuing to invest in market-linked investments that have the possibility of outperforming inflation, you are better positioned to make your money grow over time. On the one hand, this ensures that you develop the habit of saving money. While other assets, like regular deposits, can also establish a saving habit, mutual funds have the potential to beat most other investments in terms of returns, which is a benefit.

Flexible Investment Tenure

Another advantage of SIP is the flexibility in terms of investment tenure. You might need to deposit a minimum of six SIP instalments in only certain mutual funds. The amount of time you can keep making funds will be invested into a fund, however, is unlimited.


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