You must be well-versed with the popular adage – “Little drops of water make a mighty ocean”. It is expressed across several cultures as it contains an unerring truth. It essentially means that one is likely to achieve big rewards when they show perseverance and patience in life. This holds true for investment as well. Mere savings will not help you to build a substantial corpus for your portfolio. You must invest your money (savings) to beat the inflation.
Investing in mutual funds via SIP is not just about little drops of money (in terms of savings) that make a might ocean (substantial corpus accumulated on maturity), but it also protects from market volatility and fluctuations.
Basics of Systematic Investment Plan
SIP is an investment tool that allows investors to invest in mutual funds at regular intervals for a stipulated period of time in a systematic, structured and disciplined manner. Under SIP mode of investment, a predetermined sum of money gets deducted from the investor’s account on a periodic basis and is used to buy units of the desired mutual fund scheme. Thus, SIP inculcates the much-needed financial discipline among investors. As an investor, you can invest as little as Rs 100 in SIP mutual fund. Let’s understand the advantages of SIP investment
Benefits of SIP investment
Following are some of the benefits of investing in mutual funds via SIP mode of investment:
- Investing in SIP is quite easy and can be done all – beginners or experienced
- There are no hidden charges for starting an SIP investment
- An investor can invest any amount they wish to. There is no upper limit
- SIP mode of investment inculcates the much-needed financial discipline among investors
- SIP prevents individuals from risking in highly volatile markets
- SIP mode of investment is ideal for investors who are new to the investing world and are apprehensive of investing their money in the volatile markets
- Investors investing in mutual funds via SIP benefit from the concept of rupee cost averaging
- SIP investment for a prolonged duration offers the benefits of the power of compounding, also referred to as the eighth wonder of the world by many
How to pick the right SIP for your portfolio?
While choosing the right plan, an investor must be mindful of their investment horizon, financial objectives, risk appetite, etc. After considering these factors, assess the investment amount needed each month to achieve the target corpus. You can do this by using an SIP calculator. A mutual fund return calculator helps to understand the future value of your investments. The SIP calculator considers various factors such as expected inflation rate, possible returns on investments, savings, expenditure, monthly income, etc. Note that, the SIP calculator is not a definite indicator. Happy investing!