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Why investing in an SIP is a good idea

by barneytalukdar

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Systematic investment plans or SIP are a popular means of saving and growing your money. Many misunderstand SIPs to be a kind of mutual fund. But in reality it is a method of investing in a mutual fund. SIP instructs the investor to procure certain units from the mutual fund stocks on a particular given date every month of the year. The investor then decides the amount and the funds to buy.

Investing through SIPis certainly the best solution to grow your money in the stock market and surviving the risk as well. It is the most practical thing to do in the current scenario when the stock markets are booming with uncertainty. Some of the benefits of investing in one are as follows –

Expert execution –

When you invest in mutual funds,your investments are handled by experts of the industry. They are the best people to invest your money in the right funds and take appropriate steps to avoid market volatility. They constantly carry out extensive research on companies, the industry and the economy and are updated on the new developments. This is a major advantage you get on investing through mutual funds,as many of us don’t have the expertise and the time to keep track of the market.

Investment in budget –

SIP lets you invest with amounts as small as Rs.500-Rs.1, 000. So you invest a small amount regularly in mutual funds as opposed to a large one time investment. This makes investment an easy process for you as it does not affect your monthly budget. Moreover, you can even avoid any repercussions of market volatility as every month you may get an opportunity to buy more units at lower levels& lesser units when the markets are high, thereby averaging out your investments.

Get the power of compounding –

Power of compounding plays a role when investment through SIP takes place at regular intervals within particular time frame. This concept of growing your money works its wonders only if you plan to invest your money at an early age. By saving a small amount of money regularly at an early age you get a longer investment period and more time for the power of compounding to work.

Convenience of investment –

SIPs are one of the easiest investment modes as you can make payments through post-dated cheques or give ECS instructions at the time of enrolment.You can avail SIP facility on Equity Diversified Fund, Monthly Income Plan, Child Benefit Fund, Balanced Fund, Index Fund, and Tax Savings Fund etc. In this way you can enjoy better variety.

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