SIP (Systematic Investment Plan) is a medium of investing some amounts of money periodically in some mutual fund scheme in a systematic manner. An SIP enforces a disciplined approach towards investing money, and inculcates regular saving habits into an individual. SIPs work on the principle of investing regularly. This enables the individuals in creating wealth over the long-term. In the SIPs, a certain amount of money as willing by the investor needs to be deposited from the bank account and invested in some specific scheme as selected by the investor for a particularperiod of time. The investment can be done either on a monthly or quarterly basis.
In the present scenario, several AMCs (Asset Management Companies), robo-advisory platforms, and mutual fund houses offer the ease of doing SIP transactions online in the comfort of one’s home. These organizations have organized their online transactions platforms wherein the investors can do their SIP investments by following a certain procedure.
Factors Which Determine the Importance of SIPs (Systematic Investment Plans)
Here are some of the major factors which determine the importance of the SIPs and why people should go after it. Have a read:
- Light on Wallet: The various SIP plans enable the investors to make the investment in smaller parts at some regular intervals. It could be daily, monthly, and even quarterly. As a result of this, there is the reduced burden of investing or locking up the lump sum in one shot from the bank account. For instance, if the investor is not willing to invest 5000 INR in one go, then he or she can simply make use of the SIP schemes and accelerate the SIP investment by starting investing at as minimum as 250 INR per month.
- Makes Market Timing Irrelevant: SIPs can help the investors in managing the volatile nauret of the market efficiently. Timing of the market can be detrimental to the wealth creation. Therefore, the investors should focus on the “time in the market” for creating ample wealth by the selection of the best mutual fund scheme for making the investment. Various studies have proved the nature of equities in outperforming the other classes of the asset like real estate, gold, and debt on the long-term basis. These have also been found to counter the effects of inflation in an effective manner.
- Cost Averaging: Several times, an SIP investment serves a great purpose in opposition to the one-time, lump sum investment of money. This is due to the reason of rupee-cost averaging. In this factor, the investors might buy more mutual fund units when the prices are minimum. Similarly, they might buy less number of mutual fund units when the prices tend to be high. This inculcates a good discipline as it forces the investors for committing cash even at market low state, when various other investors would be leaving the markets. Therefore, this method enables the investors in lowering the average costing of the entire investment.
- Power of Compounding: SIPs subscribe the investors into the habit of investing on a regular basis. It enables them to compound their money that is invested. Over the period of long-term, the SIPs can compound wealth in a better manner as well as systematically. This is opposition to the investment of a large amount of money at one time.
- Effective Goal Planning: The investors can achieve their financial goals by enrolling for the SIPs. Therefore, the financial experts suggest the investors to start investing quite early.
Also, don’t worry about the tedious job of SIP calculations. SIP calculators will help you out. Opt for a trusted website and eliminate the headache of dreary calculations. You can go to websites like Upwardly.in, (click here to check it out), and use their tools for quick, hassle-free calculations. If you feel that SIPs are the perfect investment for you, invest in lucrative SIP schemes to avail the top benefits in the long run!