A mutual fund is an investment tool that pools your money and invests it in various assets like money market instruments, government bonds, debts and equities. There are great benefits of investing in mutual funds via SIP (systematic investment plan). Check them out below after learning about SIP.
What is SIP?
It is an investment plan that lets you deposit a specific amount in an investment scheme at regular intervals. So, when you pay instalments via SIP, a fixed amount gets transferred from your account to the scheme as per your chosen frequency.
The SIP calculator considers the investment term, SIP value and assumed rate of return to show an estimate of returns. However, it cannot be a 100% accurate figure since the market is unpredictable.
Advantages of Investing in Mutual Funds Through SIP
Disciplined regular investments
When you choose a systematic investment plan, you can invest at regular intervals— every six months, quarterly or monthly on a predetermined day. This helps build the discipline of making regular investments. Thus, when you invest in a long-term goal, you commit yourself to save regularly. This boosts the chances of attaining your goal.
Convenience
Investing through SIP is also hassle-free. You only need to request your bank to enable auto-debits from your account to the chosen scheme of investment at regular intervals. This way, you save time and effort of visiting the bank to make manual payments. Plus, there is no chance of missing out on your investments, and, therefore, no need to set up reminders.
Rupee cost averaging
It helps you beat market fluctuations so that your investments are unaffected by market volatility. When the stock prices fall a lot, a systematic investment plan allocates you more units. Alternatively, it allocates fewer units when the stock prices are considerably high. This averages out your savings.
Power of compounding
You can earn more profits on a fixed amount of regular investments with the power of compounding. This helps achieve long-term gains that you can check using the SIP calculator. So, for instance, if you plan to invest in your child’s education, use the calculator to check the estimated returns. To make sure the returns meet your goal, consider starting to invest from early on.
Flexibility
Investing in SIP for the long-term of course generates more returns. However, due to some reason, if you cannot continue with your SIP investment, you can stop it anytime during your investment cycle.
Alternatively, if you begin to earn or save more, you can start a fresh SIP plan in another or the same mutual fund.
If you have an insufficient account balance for the SIP investment of a particular month, you can nevertheless continue with the investment for the following months. You would not incur any charges or fines.
Most importantly, you can start investing in a mutual fund via a systematic investment plan by paying as little as 500 INR per month. Now that you know about SIP and the advantages of investing in mutual funds through SIP, opt for it right away.
