SIP’s are trending, isn’t it? So now before we get into the depth of investments, let’s just see and
Understand something about the very important word for trading market, and mutual funds- SIP.
SIP abbreviated for Systematic Investment Plan gives you a breakdown of how much money you need
to invest each money instead of investing it altogether to reach whatever targets you have set for
investments. Now that you know what a SIP is the first relief is that you do not have to pay a lump sum
amount in a single shot! Moving ahead lets’ see the list of more benefits of SIP.
1. Give you a variety of options:
SIP has options like Flexi-SIPs and Step-up SIPs which helps you invest in more ways. With SIP’s
you can increase the amount of SIP if your income increases. In case of Step-up SIP, you can
choose to increase your SIP amount in a gradual manner, in co-ordination with your income.
2. Get the compounding benefit:
Since you invest on monthly basis and get returns also on monthly basis, the returns are added
to your actual investing amount to gain more returns. When you keep investing consistently
over a period of time you ensure exponential growth due to compounding of amount.
3. Helps you to average out investment costs :
The mutual fund market is a volatile one and the funds do see their share of highs and lows.
Since SIP’s are monthly investments, they average out the cost of investing by getting more
units when the markets are low and getting lesser units when the markets are high, this nullifies
the effects of adverse market conditions.
4. If you are out of money SKIP that month:
In the SIP way if investing if you are really out of budget in some month you can wait back to put
in money in SIP for that money without being fined for that month. The next month you can
continue without any disruptions caused due to inability of paying SIP in the last month.
5. You can stop it anytime:
As compared to recurring deposits(R.D) you will not be fined for stopping your monthly deposits
in SIP. SIP gives you the liberty to stop investing at anytime and also whether you wish to
withdraw the amount or keep it invested in the mutual fund.