There are a number of options available for investing in mutual funds and one of them is SIP (Systematic Investment Plan). SIP is a mode of investment in mutual funds which lets you start by investing a small amount of money periodically instead of lump sums at regular intervals like weekly, monthly or quarterly.
In SIP (Systematic Investment Plans), a fixed amount of money is debited from the investor’s bank account periodically and invested in a specified mutual fund. The investor is allocated an equivalent number of units according to the current NAV (Net asset value). Every time a sum is invested, more units are added to the investors account.
This method is becoming popular among the investors because of possibility to earn high returns with lower risk profile. Here we are with four reasons as to why SIP is a good option for investing:
1.Disciplined investing
The discipline involved in investing through SIP keeps you controlled from aggressive investing. Through disciplined, regular investments you can stop worrying about when and how much to invest. In a way, it eliminates the need to actively tracking the market.
2.Rupee Cost Averaging
Timing the market is a hectic task. While investing through SIP, the investor does not have to worry about where share prices or interest are headed. Once the mechanism is set-up, fixed amount will be deducted from your account with more units being bought in a declining market and fewer units in a rising market. Although SIP does not guarantee a profit, it can go a long way in minimizing the effects of investing in volatile markets.
3.Support open-ended funds
SIPs are done in open-ended funds where the investors can invest and take out the money anytime. The price at which shares in an open-ended fund are issued or can be redeemed will vary in proportion to the net asset value of the fund, and therefore directly reflects the fund’s performance.
4.Power of Saving
The key to building wealth is to start investing early and to keep investing regularly. The longer one delays in investing, the greater the financial burden to meet desired goals. Saving a small sum of money regularly at an early age makes money work with significant impact on wealth accumulation.
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