What Are The Benefits Of Investing In Sip
This Article Includes
Recent technological advancements have made it easier for people to invest their money in the right avenues. There has been a major development in investing in mutual funds. A recent statistic showed that there are close to 4.64 crore active accounts through which SIP investments happen. It is always considered a Good Investment Plan when you are investing in SIPs.
If you are looking for SIP benefits and want to know how this investment strategy works, you are reading the correct article since this will help you to gain greater insights into it. In the long run, investing is all about maintaining the correct portfolio and monitoring securities and instruments in the market. So, let us get to know more about systematic investment plans.
What Is a Systematic Investment Plan (SIP)?
This is one of the most popular ways of investing money, and many seasoned investors use this to invest money. With monthly investments, you can actually see the benefits of investing for the long term regularly and how this helps you to grow your money. Since there is no lump sum involved and money gets automatically debited at the beginning of the month, there are fewer chances of using it elsewhere.
When you invest in SIPs, you can easily increase the amount periodically as per your will. This helps salaried individuals, business owners, and everyone to make money at the right place. Also, you can have different SIPs running with smaller amounts into different portfolios. This attribute is all about the power of compounding in SIP. Since the interest amount also gets invested in the SIP plan, there is a greater potential for growing money. Investors may choose to invest in growth plans in equity, which essentially reinvests all dividends back into the market.
The Benefits of Systematic Investment Plans
There are many advantages of SIP, and that is why people love to invest in it. These are enumerated and discussed below:
- You can have multiple SIPs under your name: Most people prefer to have different SIPs of equivalent amount running every month. This helps in case of sudden liquidation and using the money for emergencies. Also, while investing, one should not put all their eggs in a similar basket this is called portfolio diversification. This is the major reason why multiple SIPs work easily.
- You can skip the payment for a particular month: When you start in your initial days, if allocating money towards your SIP becomes difficult, you can choose to skip the payment for the SIP, and there will be no ill consequences. If you use any other saving scheme like recurring deposits, you are likely to incur penalty charges.
- You will not mess up your savings: Most SIP amounts get deducted at the beginning of the month after the salary amount is credited. Hence, if you are into compulsive shopping, you will not lose out on your hard-earned money since it will be deducted early. This is one way you can try to be more disciplined towards your financial approach to life.
- This is a long-term play: The benefits of SIP Investment are always long-term. The more you invest and the longer you invest, the greater the returns will be, and this will also make your financial future secure and stable. Many seasoned investors only rely on SIP investments for their way of growing money.
- The compounding works in your favor: This is the major reason why the effect of returns is always long-term. Your monthly or quarterly investments end up with returns, and that amount is invested in the next investment, which gets added. Hence, the corpus gets larger every month, and the investment size increases based on compound interest.
- You can stop a SIP quite simply: SIP Investments are more liquid in comparison to other kinds of financial instruments, like fixed deposits, shares, securities, etc. This is one of the major reasons why people stop a SIP and use it for other avenues or investments.
- You can invest online in funds: With the advent of online platforms like WealthDesk, investing in portfolios has become easier, and you can simply start a SIP right from the comfort of your home. You can invest in WealthBaskets that are managed by SEBI registered professionals and are managed based upon sectors, themes, and other factors.
The Bottom Line
If you are not completely confident of investing in the share markets, then the SIP in the share market is the best way in which you can invest your money at regular intervals. SIP Investments allows newbie investors to protect themselves from market volatility. There are many trusted online platforms like WealthDesk through which you can get curated portfolios and invest in SIPs.
WealthBaskets assists you in investing in low-cost, diversified portfolios. Each WealthBasket represents an investing concept, with several investment items in varied weights determined by a thorough research process. With the benefits mentioned above in mind, plan your investments and start investing for your future!
An SIP is beneficial and a Good Investment Plan as it is a periodic investment scheme and does not require a lump sum commitment of money. Also, the terms and conditions are flexible, and you can choose your monthly commitment toward investing money. SIP allows you to buy assets at varied prices over the investment period, allowing an investor to take advantage of lower average buying prices when markets are down.
Depending on your financial goals, SIP benefits are always better and higher than investing in other instruments such as fixed deposits. The plans are flexible, you can easily subscribe, and the practices are healthy. You can also learn about it on your own and eye for funds to invest your money. The fund managers are also great as they have the expertise and manage your funds efficiently.
The timings and results of the market do not matter when it comes to investing in SIP since you are investing in mutual funds. Moreover, SIPs are a great way to accumulate different mutual fund units at a lesser price in case of a bearish market so that when the value increases, there are higher returns. Hence, it is mostly safe in comparison to other instruments.
SIPs seldom lose money, but there is a slight possibility of losing money as markets tend to be volatile. However, there are different SIP tax benefits, and when the markets do not perform well, it is a good strategy to round up as many mutual funds units as possible as they will have greater returns when the markets pick up.