A systematic investment plan (SIP) is a hassle-free and smart way to invest your money in mutual funds.
It works on the principle of continued and regular investments and is much like a recurring deposit, where you put a small amount of money every month. It enables you to invest via smaller periodic investments (Monthly/Quarterly/etc.) instead of a heavy lump sum one. We call it Monthly SIP plans.
For instance, it allows you to invest with 10 periodic investments of ₹1,000 each, instead of investing ₹10,000 at one go in a mutual fund. You can invest the money monthly or quarterly without changing your other financial liabilities.
Link SIPs to your Financial GOALs:
Do you wish to purchase a car in next 3 years? Do you want to accumulate funds for your dream house? Are you planning for a dream vacation with your family in next 5 years? Are you looking for amount to be accumulated for your child’s higher education? Planning to accumulate funds for your Retirement? How to start sip investment?
One solution to achieve all the above ::Start SIP for each Financial Goal and remain disciplined till the GOAL is achieved.
It’s important to understand the rupee-cost averaging concept and the power of compounding for better appreciating how SIP work.
It have brought mutual funds within the reach of ordinary people because it enables those with a tight budget to invest ₹500, or ₹1,000 per month or any amount they are comfortable with.
Making small investments via monthly mutual funds may not seem attractive at first. But it enables investors to get into the habit of savings.
And, over the years, the money can compound to generate handsome returns. For instance, a monthly SIP of ₹1,000 at 12% growth, would amount to ₹2.3 lakhs in 10 years, ₹34.95 lakhs in 30 years.
NOW SOME MAY ASK WHY SIP
Here are a few reasons to go for an SIP.
Discipline: The cardinal rule to build a corpus of money is to invest regularly, stay focused, and maintain discipline in your investing pattern. ₹500 or ₹1000 set aside every month won’t dent your monthly income. Besides, it’s always easier to part with ₹500 every month, instead of investing a lumpsum at one go.
The power of compounding : It’s advisable to start investing early in life.
in fact, I always recommend that once you start earning, you should start investing. A major reason behind this is the power of compounding.
Let’s take an example. Ramesh starts investing with ₹10,000 every year at the age of 30. Anil, on the other hand, begins investing an identical amount from the age of 35. At the time when both of them reach 60, Ramesh will have a corpus of ₹11.33 lakhs, while Anil will have only ₹7.31 lakhs (assuming an 8% compounded return on investment).
The ₹50,000 difference in the invested amount would lead to a difference of over ₹4 lakhs at their respective age (60) of retirement. The effect of compounding would cause the difference. The longer you stay invested, the higher would be your returns.
Convenience: SIPs are arguably the easiest way to invest. Now with the advent of so many automated platforms as well as ECS instructions in place picture.
The fund managing company will auto debit the Systematic Investment Plan amount on your requested date and credit the units to your account. It will also inform you in this regard.
LOOKS INTERESTING AND THOUGHTFUL .YUP ! GO FOR IT THEN