Are you thinking about investing in mutual funds? Are you confused about whether or not to use SIP? Read on to learn 10 reasons why SIPs in mutual funds are one of the finest investing solutions for any investor.
- Small Amounts can be invested: Most mutual fund schemes provide SIPs, which allow you to begin investing with as little as Rs. 500 each month. This is a far smaller investment than the most popular investing options. This means that even people in their twenties who have recently begun working can begin investing in order to achieve their long-term objectives.
- Adjust SIP Amount the way you want: SIPs are extremely adaptable. There is no need to continue investing merely Rs. 1,000 if you start a Rs. 1,000 SIP in a mutual fund plan of your choice. If your savings grow in the future, you can increase your SIP amount or start a new SIP in the same mutual fund scheme or another one of your choosing.
- Stop or Skip SIP anytime: There is no requirement to make a SIP investment every month for a set period of time. You can take a break from the SIP for a few months or even discontinue the investment at any time. So, in case of an emergency, if you do not have adequate funds to invest, you can postpone SIP payments for a few months.
- SIP’s make you a Disciplined Investor: The capacity of SIP to make you a disciplined investor is the second significant reason why it is the best. Most investors begin investing, but do not continue on a regular basis. To move closer to your financial goals, you’ll need to make regular investments. SIPs are designed to add additional discipline to your financial journey by their very nature. You specify a sum that is automatically invested in the scheme of your choosing, removing the need for you to make periodic installments.
- Never have the need to Time the Market: It’s nearly impossible to precisely time the markets on a regular basis. SIPs, on the other hand, do not need you to timing the markets in any way. Regardless of market conditions, you continue to invest a fixed amount each month. If the market is down, you’ll get more fund units; if the market is up, you’ll get less.
- Reduces the average cost of Mutual Fund Units: Continuing on from the previous point, SIPs can also help you save money by lowering the average cost of mutual fund units. The fund’s NAV is low when markets are falling and high when markets are rising. When you spend a fixed amount over time through a SIP, the average cost of purchasing units tends to be lower in the long run than while you make a lump sum investment when the markets are high.
- Power of Compounding: If you choose the growth option when you start your SIP, the returns on your investment will be added back to your original contribution amount. This creates a compounding effect, which could result in high long-term returns. Starting a SIP in any scheme of your choice and selecting the growth option might be lucrative if you have long-term financial goals.
- No Emotional Investing: It can be difficult for an investor to remain unaffected by market fluctuations. Because of the market’s volatility, people are more likely to make emotional financial decisions that do not always produce the desired results. SIPs, on the other hand, safeguard investors from making such errors. All you have to do is invest a set amount every month, regardless of market volatility in the short term.
- Complete Transparency: In India, the mutual fund business has grown by leaps and bounds in recent years. AMFI and SEBI have adopted various harsh procedures to protect the interests of investors, which must now be followed by every mutual fund scheme and AMC. For investors who are just starting their investment adventure through SIPs, this has made the mutual fund sector open and safe.
- Online Portfolio Tracking: Most of India’s biggest AMC’s now allow investors to manage their mutual fund investments online. When you sign up for a SIP, you’ll be given a user ID and password that you may use to log into your account at any time. From the comfort of your own home, you may follow your SIP, move to a different scheme, cancel SIP, start a new SIP, and even redeem the units.
Ready to Start your SIP Journey?
Now that you have a better understanding of why SIPs can be a good investment option, it’s time to get started investing as soon as possible. Delaying your decision to begin investing will only make achieving your financial goals more difficult.
However, you should be aware of your investing profile, which includes your risk appetite, investment horizon, and financial ambitions, in order to choose mutual fund schemes that best meet your needs.
