There have been drastic changes in the investment market in India in the past few years. Confused about what is SIP and what are the different advantages of investing in SIP? Stay tuned till the end and you will definitely learn why you should invest in SIP mutual funds.
SIP Investment – Mutual funds have become one of the most sought investment options in the market. This has made the SIPs popular among investors. They are one of the most efficient and reliable investment strategies for beginners as well as veterans in the field.
Want any legal assistance for your mutual funds-related issues? Visit Vakilsearch, our legal advisors are ready to assist you.
What is SIP?
Systematic Investment Plans or commonly known as SIPs are tools that are adopted by mutual fund companies all over the globe by which investments can be made in a systematic method and dividends can be paid out easily. In simple words, SIPs are just like a systematic scheme for investing money in mutual funds. In a SIP program, a fixed amount is invested from time to time in your preferred mutual fund scheme. The amount to be invested is predetermined and is usually deducted from the savings account of the investor.
The interval between SIP investment can be weekly, monthly, or even on annual basis. As the name suggests, SIPs are systematic plan which makes them easy to manage and are suitable for investors of any age group.
Why should you Invest in SIPs?
There are many reasons why SIP programs are appreciated by investors of any age group. Here are a few of them
- Introduce Discipline in Your Investments
Many people complain that mutual funds are too risky and they always end up losing money in them. The main reason behind this is the lack of proper planning. But with the help of SIPs, you can bring financial discipline and improve your SIP investment habits. As you are determined to invest a fixed amount of time at a predetermined time, it helps to inculcate the habit of savings. This helps to control your expenses and convert your earnings into savings at a steady rate.
- Easy and Convenient
SIPs are known to be one of the most investor-friendly options in the market. With sip programs, you don’t have to worry about missing paying the investment on time, as the SIP investment are automatically deducted from the account of the investor.
Even if you are running low on funds, SIPs allow skipping an instalment without any penalties or extra charges. Apart from investing, withdrawing money from the SIP scheme is also pretty easy. The funds in the SIP program can be withdrawn as per our choice as they are open-ended funds and don’t have a fixed tenor. The funds can be either withdrawn in one go or instalments as needed.
- Smaller Amounts Mean Less Risk
It doesn’t matter if your earnings are low or high, with SIPs, you can start investing in mutual fund schemes for as low as ₹ 500 and become part of the Indian share market. To learn the art of investment, starting with small amounts is the best option for beginners as it lowers the risk factor involved and helps to encourage them to invest slowly and steadily. Smaller amounts mean less hassle and thus make keeping track of money easy and convenient for investors.
- Maximum Flexibility
SIP programs provide maximum flexibility when it comes to SIP investment options. You can join a sip program and stop a SIP program according to your needs. Most of the SIP programs allow you to opt out of the program without any extra charges or penalties. Even if you wish to start a SIP program, there are no additional charges that investors might incur. You can also alter the amount to be invested according to your financial conditions at any point in time.
- High Returns
SIP programs tend to incur zero costs and the financial benefits associated with them are much higher, making them one of the most lucrative options for investments. As compared to traditional investment options like fixed deposits, SIPs help to gain much higher returns.
- Timing Doesn’t Matter
Unlike the share market, you don’t have to worry about the timing in the market when you join SIP programs. SIP investment work on the principle of averaging, i.e., when the stock market is low, you will receive more shares for the price and vice versa. So you do not lose out much and your financial portfolio will be balanced at the end of the day.
- Compounding is Great
SIP schemes work on the principle of compound interest, i.e., your returns from the SIP program will be reinvested until maturity and thus provides exponential growth to your returns. In simple words, investing small amounts for long period is always better than a large amount used as a one-time investment.
- Wide Range of Options
Even for a single mutual fund scheme, a variety of SIP programs are available, giving investors a wide range of options to choose from that suits them best. These schemes vary in various factors like the SIP investment interval, the investment amount, the risk factor involved, the maturity period, etc.
Now we know what are the advantages of SIP schemes, Let us learn how to invest in them in the right way.
How to Invest in a SIP?
- Choose the Right SIP Mutual Fund – Identify the mutual fund scheme which matches your investment profile i.e., your risk profile, your investment goal (Short-term or long-term), financial objectives, etc.
- Connect with the SIP Program – Once you have selected the SIP mutual fund that is looped with your goals, you need to connect with the respective institution to start investing in the SIP investment after completing the required documentation.
- Start Investing – Once everything is set, you can start investing in your preferred SIP through your online Demat account to further simplify the process
Conclusion
SIPs are a form of passive investment and can come in handy whenever you need some money for your child’s education or marriage, etc. To get maximum benefits from SIP programs it’s always better if you invest for an extended period. In short, SIP stands for minimum and smart investments and maximum and long-term returns. To get personalised help or get your doubts resolved on SIP schemes and get clear guidance to prepare your personalised investment plan, you can always connect with financial experts at Vakilsearch.
