5 reasons why you should invest in SIPs
Systematic Investment Plan or SIP is a method of investing a fixed sum at regular intervals in a mutual fund scheme. Know more
Whether the objective is wealth creation or investment, mutual funds allow investors to help generate better inflation-adjusted returns, without spending a lot of time and energy on it.
Systematic Investment Plan or SIP is a method of investing a fixed sum at regular intervals in a mutual fund scheme. It is similar to RD or a post office deposit. Systematic Investing in a Mutual Fund is the answer to preventing pitfalls of equity investment and still enjoying high returns. And it makes all the more sense today when stock markets are booming.
Let’s have a look at 5 prime reasons why one should consider investing in SIPs.
- Convenient way to invest regularly
For early investors, pooling in a large sum of money is not economically feasible. SIP offers an easy and convenient way to invest by contributing small portions of money monthly. The major advantage here is lower and regular investment without cutting through your expenses.
- Long term perspective
Permanent assets like, house or a vehicle require huge one-time investment. Raising such large sum of money requires a huge corpus. This is where the actual benefit of SIP comes into play. Small investments, over a period of time, result in large wealth and help fulfil our long term objectives.
- Brings down the average cost of buying
Rupee Cost Averaging is the principle on which SIP works. The concept is to put small amount of money in the market when the market is low which will give large number of units and fewer units for the same amount when the market is performing well. The average unit cost of these two purchase timings comes out to be lower than the cost of one-time investment.
- No need to time the market
As explained above, there is no need to time the market to invest through SIPs. Rupee cost averaging brings down the unit cost to a great deal in the end.
- Longer you invest, higher the returns
The star benefit of mutual funds is that the safety of stocks increases with increase in investment tenure. For Eg: Investments that are done for 5 years give higher returns than investments done for 1 or 2 years. Hence it is always recommended to invest for a longer period of time.
Still have questions? Check out our end-to-end guide here to understand mutual funds investment