SIP is the acronym for Systematic Investment Plan, it is basically a method to invest money into mutual funds in monthly, quarterly or yearly instalments rather than lump sum (all at once). SIP's help investors invest some portion of their income at regular intervals rather than having to invest a major amount of funds at a single period of time which may cause a cash crunch. SIP's are extremely important for all individuals; they are a great instrument to save money and help earn interests.
SIP can have multiple advantages to different sets of individuals but some of the most prominent ones are:
1. Low Investment Amount: You can start an SIP with five hundred rupees per month, no other instrument in the financial market has a minimum investment requirement as low as an SIP. Individuals who are just starting to earn or have low surplus funds can easily invest and save through an SIP due to a very low minimum investment amount.
2. Easy to start: In today's era due to digitization everything is very efficient and easy to start and invest in, but comparatively investing and setting up an SIP is a fairly nominal task and does not require much time and efforts.
3. Simplicity: Our financial markets have a lot of fairly complex instruments that might be difficult for a layman to understand but SIP as an instrument is significantly easy to understand due to its simplicity and practicality, even individuals with absolutely no background in finance can easily grasp how an SIP works.
4. Periodical Payments: In SIP's you can invest on a monthly basis, quarterly basis and even on a yearly basis so this splitting of payments actually makes it easier for us to gradually invest a large sum of amount in the long run without having a major impact on our daily lives in the short run.
5. Customisation: SIP's as an instrument are extremely customisable according to the requirements of the investor. You can choose the instalment amount, the time of the instalments, which type of fund you want to invest in and the list goes on and on. This kind of customisability is not available in most of the other financial instruments and can make it more effective and efficient for investors to plan and invest.
6. Compounding: SIP's help you attain the power of compounding in the long run. If you keep patience and regularly invest in your SIP for a long period of time more often than not you will be able to gain the significant benefits of compounding.
To sum it up we here at Begininvest.com regard SIP to be one of the most effective investment tool available in the financial markets, to start an SIP please visit Begininvest.com.