What is SIP and what are its advantages?
Posted on: 16/Sep/2017 12:48:56 PM
SIP stands for Systematic Investment Plan. All the Mutual Funds offer this plan. In this, one can invest a fixed amount in a weekly, monthly or quarterly basis, giving the bank a standard instruction.
Anyone who has a steady income can opt for this scheme. Based on one’s financial goal, the investment can be made as equity, debit or gold. For example, when the goal is a long term one, SIP equity fund is the best suited one.
Starting from as low as Rs 50 per month, one can start this investment. Anyhow, such very meagre amount will not going to be of help in spite of fetching you with good returns. Hence, while enrolling for the scheme, consider the corpus and time you eye on.
In the recent years, investors are showing good interest towards SIP. According to the Association of Mutual Funds called AMFI, the total count of SIP accounts is 1.59 crore where regular investments are made. Between FY 2017-18, about 8.55 lacs SIP accounts are added every month on an average. The average of these SIP accounts is 3,275.
Why is deducing the amount month on month is beneficial in the form of SIP account? How can it benefit you? Here is the list of all its benefits:
Disciplined investment
Many people enter the markets having a lot of enthusiasm. However, they don’t stick on to their monthly investment. When it comes to investing for a specific purpose, you need to maintain a discipline for achieving it. SIP helps you maintain this discipline every month without fail.
Advantages of compounding
Reinvesting the interest gained is what we call compounding. There is a substantial different between the corpus accumulated as compared to compounding. When you invest a little amount over a period of time, it will evolve as a large corpus. For obtaining the most of these benefits, you need to begin your investment at the earliest. Instead of investing a large amount, just investing a little over a long period is definitely helpful in our lives.
You cannot time the market. With SIP, the investor need not worry about any kind of dip in market. When the price is less, your money will buy more, and will buy fewer when the price is high.
Flexible option
SIP is a flexible choice of investment. Investors can invest their money in open-ended funds. From this, the investors can make investment or take funds at any time they want. SIP pausing is also possible. And they can also withdraw when you need funds.
