A systematic investment plan or an SIP 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.
An SIP is the simplest method to invest and save your money due to the fact that a particular nominal amount keeps on getting deducted from your account and gets invested into the securities you have chosen.
SIP is for anyone and everyone, you can start an SIP with an investment as low as Rs 500 a month and you don’t need to have knowledge about how and where to invest, all you have to do is surf and choose the right mutual fund or talk to a professional advisor and he will help you select a suitable and well performing mutual fund and that’s all the work you need to put in to start your investing journey.
SIP helps you attain the power of compounding:
When you start a long term SIP and keep on regularly investing in it for a substantial period of time, you are able to garner the benefits of compounding which refers to making interest on previously earned interest and so on. Compounding can turn small regular investments into big chunks of wealth.
Easy to sustain for a long period of time:
The amount of SIP you start with has to be an amount that you can easily forgo every month, like if you know that each and every month keeping in mind your expenses and earnings you can forgo Rs 5000, then your SIP should be no more than Rs 5000. Hence the SIP would be very sustainable for a long period of time because it is a very nominal amount that you know you can afford to pay out every month without much of a cash flow issue.
Helps you average your purchase price:
The stock market goes up and down very often and is not at all stable, an SIP buys NAV’s of mutual funds every month or every quarter which helps us in averaging the cost at which we are purchasing the funds. For example, if you bought 10 shares in January where the market was at its lowest and 10 shares in November when the market was at its peak then you will lower the average price of the November purchase due to the fact that you have bought shares at the lowest prices as well.
These right here are just a few primary benefits of starting an SIP, till date SIP is one of the most effective and efficient investment cum saving method and every earning or even non-earning individual should get an SIP.
To know more about SIP’s or to start investing into SIP’s please visit begininvest.com