Think of a long-term financial goal and a SIP can enable you to achieve it easily. SIP or Systematic Investment Plan is a tool that can help you create a significant corpus, by investing a small sum of money each month in mutual funds over a certain time period. By investing in a SIP early on and wisely, you can easily fulfil all your financial goals.
Here is everything you need to know about SIP and why SIP is important:
How does SIP work?
SIP allows you to invest a fixed sum regularly in your choice of mutual funds online. The SIP amount is deducted from your bank account at your preferred frequency (generally every month). When you invest in mutual funds through the SIP mode, you buy mutual funds units on a given date each month. You can start a SIP investment as small as Rs. 500 per month.
What are the advantages of investing in a SIP?
- Automated investments: SIPs promote disciplined investing by automating your investments every month and allowing you to create wealth in the long run. The SIP money is automatically deducted from your bank account on a specific date.
- Stop or skip the SIP: When you invest through the SIP mode, you can skip or stop your investment (up to three months) without incurring any penalty. This is helpful when you have inadequate funds or a financial emergency.
- Rupee cost averaging: When you invest in mutual funds online through SIP, you can get more units when the market moves down. However, you will get fewer units when the market moves up. This means that the total cost of your investments averages out over a period when you invest in mutual funds online through SIP.
- Power of compounding: SIP investments in mutual funds allow you to leverage the power of compounding. The returns on your SIP investments are reinvested in the market. This means that you get returns on your investments and reinvestments, both. The longer the term of investment, the larger corpus you can accumulate, owing to the power of compounding.
- Diversification: Mutual fund investments through SIP, allow you to diversify your investments across different industries and asset classes. This reduces the risk of market volatility, which in turn, give you increased and steadier returns.
- Lighter on the wallet:With SIPs, you can invest a small amount every month instead of a lumpsum. This will help you inculcate the habit of saving each month and will help you save, which might not be possible if you are paying a lumpsum.
As a wise investor, start your SIP investment early in life to take advantage of these benefits. You can use Tata Capital Moneyfy app to manage your SIP investments end-to-end and plan for goals seamlessly and conveniently.