You must be familarised with the well-known adages such as ‘Rome wasn’t built in a day’ or ‘little drops of water make ocean’. These phrases are expressed across several cultures as they hold absolute veracity. These adages emphasize on the importance of exhibiting patience and perseverance in life, which later fruits in the form of significant rewards and loots. Investing works on a similar concept. And this concept is widely exhibited by SIP investments. Unsure what an SIP investment is? Don’t worry we will help simplify it for you. Let’s understand how you can SIP your way to attain your dreams.
What is SIP?
SIP is simply an investment tool offered by various fund houses and AMCs (asset management company) that help investors to invest in mutual funds in a systematic and disciplined way. Under SIP mode of investment, fixed investments are made towards desired mutual fund schemes for a fixed duration at regular intervals. The periodicity of the intervals can be daily, weekly, monthly, semi-annually, or annually. The most common periodicity is monthly.
Benefits of SIP
Following are some of the benefits of SIP enjoyed by investors:
- As SIPs are usually made for a long duration, an investor enjoys the maximum benefits of the power of compounding, also claimed as the eighth wonder of the world by several mutual fund experts
- As regular investments are made towards mutual funds, it inculcates a sense of financial discipline among investors.
- Unlike most investments, there are no hidden charges associated with SIP investment
- Investing in mutual funds via SIP is a seamless process. Anyone can invest in mutual funds via SIP irrespective of the fact that they are experienced or new to the world of investing
- There is no upper limit to invest in mutual funds via SIP. You can invest whatever amount deems fit for your investment portfolio.
- SIPs are light on the pockets of investors. An investor can invest as low as Rs 100 per month in mutual funds via SIP.
- If you invest in SIP, you end up investing in different market cycles (bullish and bearish market cycles). As a result, the total cost of mutual fund units bought gets averaged out. This concept is popularly known as rupee cost averaging.
- The SIP mode of investment averts investors to expose their funds to highly volatile markets.
To achieve your financial goals at the right time, you must ensure that you invest the right amount in SIP investments. SIP calculators can help you do the same and evaluate the right investment amount to attain a specific amount. SIP calculators can also help you adjust against inflation.
Sure, SIPs help to achieve a huge corpus over time. However, it is not just about little drops of money (in investment terms – savings) that help make a mighty ocean (in investment terms – the considerable corpus one receives on maturity); but it also protects an investor from fluctuations and volatilities in the market. Happy investing!