Every individual has certain goals that they wish to achieve in their lifetime. It can be as basic as providing for their child’s higher education, buying a house or car, saving for retirement to as different as saving for the latest collection of an individual’s favourite couture. But how does one achieve their financial goals? Well, one way of doing so is investing in mutual funds. Different types of mutual funds help varying investors to meet their varying investment goals. One of the most popular ways of investing in mutual funds is the systematic way of investment – SIP (systematic investment plan). In this article, we will understand how SIP mode of an investment can help you create a bright future for you and your family in an easy and systematic manner.
What is SIP?
SIP is a means or an investment tool that allows investors to invest in their desired mutual fund schemes. Under SIP investment, a fixed amount of money is invested on a regular basis in preferred mutual fund schemes for a fixed duration. An investor enjoys the several benefits of SIP investment that has the potential to provide investors with a bright future.
Working of SIP investment
When you invest in the markets through SIP mode of investment, you end up investing a predetermined sum of money at periodic intervals for a given duration. On the predetermined date, a particular sum of money gets deducted from the investor’s bank account and is used to buy mutual fund units at the prevailing net asset value or NAV of the fund. Depending on the type of SIP you choose for your investment, you can decide the parameters of your SIP investment. You can choose to increase your SIP investment amount through step-up SIPs. You can also choose to invest for an indefinite period of time in the markets through perpetual SIPs. You can also change your investment amounts as and when needed with the help of flexible SIPs. As you can see, depending on your investment needs, you can choose a type of SIP that best suits your investment needs.
Benefits of SIP
Here are some of the advantages of SIP investments that are enjoyed by SIP mutual fund investors:
- An investor can invest as less as Rs 100 per month in mutual funds through SIP
- One of the benefits offered by SIP mode of investment is the rupee cost averaging it offers to investors
- An investor can also enjoy the potential to generate significant returns on their investments, thanks to the power of compounding
- With SIP, an investor does not need to time the markets
- SIP investments inculcate the much-needed financial discipline among investors
- It is quite easy and convenient to invest in the markets through SIP as SIP investments are automated in nature
Whether you decide to invest in mutual funds through SIP mode of investment or lumpsum mode of investment, you must ensure that the mutual fund schemes that you choose are in line with your investment portfolio. In essence, the objective of the fund must align with your risk profile, investment horizon, and financial goals. Happy investing!
