Things To Know About SIPs

Here are some benefits why you should adopt the SIP route:

Helps achieve financial goals

Financial goals can be aligned very easily, whether it is the short-term or long term. Since investment can be done in any range through SIP mode, one can easily calculate the monthly need of investing money assuming a certain rate of returns as per the risk appetite of an individual and accordingly, one can make an investment in the desired mutual fund scheme which can help them achieve their goals in reality.

Power of compounding

The overall value of corpus multiplies over a period of time with interest earned on previous interest and principal. For example, if you invest Rs 10000 a month over a period of 20 years assuming an interest rate of 12%, you will be able to generate approximately Rs 1 crore by saving just Rs 24 lakh throughout the tenure.

Benefits novice investors

SIP has an inbuilt mechanism to mitigate risks. While entering into mutual funds investing for the first time, it is suggested as one of the best investment strategies to start your investment.

Inculcates financial discipline

Investing through SIP in building a disciplined approach by forcing to save and invest regularly. It helps you dedicate your savings towards a financial goal over a long period of time.

Good investing strategy for novice investors

Investors who are new to equity investing and also, who are risk-averse can go through this mode investing their money.

Flexibility in choosing and changing the date

You can easily change the date of periodic investment by simply intimating your fund house through the designated form. For say, if you want to change the date of auto deduction of your savings from your bank account, you can easily do it by signing and submitting the ECS (Electronic Clearing Service) form of same scheme in the respective AMC. The process ideally takes 30 days.

Cost Averaging

It helps in reducing market risk by buying units at different price points and averaging your cost.  Through this method, you can accumulate more units over a period of time which helps in multiplying your wealth. However, you need to remain invested for a longer term.