SIPs: Systematic Investment Plan in Mutual Funds
These days inflation is very high and in context of investing we have very limited options to beat inflation and get a handsome amount of money as returns on the investments. Due to lack of options, in a very span of time mutual funds emerged as the effective opportunity to invest and get the financial success in the life. And this will be done with the very basic understanding of Mutual funds with the help of SIPs which is also called as Systematic Investment Plan. SIPs can be focused for financial goals with that investor can invest their fixed amount of money on a regular basis, it can be monthly or quarterly over a period. The installment can be as low as 100 INR. We can consider SIPs as we have recurring deposits (RDs) in banks but with the little difference and having some level of risks involved in mutual funds. It is a very effective tool for grow your money as investors can get the benefits of power of compounding if they keep invested for longer time. Power of compounding works by growing the invested amount exponentially, that means, your profit will be added and works same as the principal amount to get maximum returns.
According to MutualFundsSahihai.com, it is very important to invest for the long-term, which means that you should start investing early, in order to maximize the end returns. So, your mantra should be – Start Early, Invest Regularly to get the best out of your investments. There are number of platforms which are available in the market online from where you can start your SIP journey. The most popular platforms are given below to check.
How will SIPs work for you?
When you start SIPs, first you have to select Mutual fund in which you want to invest your money. There are various types of mutual funds in the market online, that we will cover in a different post as it is a vast topic to cover. In SIPs, investor need to fix an amount and invest.
From this money, a certain number of units will be purchased and added to your account according to the price at which those units available at that time. On a regular basis the amount will be deducted from your bank account which is linked to your mutual fund account and get invested timely during the highs and lows of the market.
Benefits of SIPs
- Rupee Cost Averaging
It is an approach that will helps us to mitigate the timing factor involved in the stock market. In Rupee Cost Averaging, you invested fixed amount of money at a regular interval despite of looking the market are high or low. When the market is low then it will purchase higher number of units and at the time of high market it will get lesser number of units to average the purchase. It is beneficial most of the time specially to them who don’t have time and knowledge to time the market.
- Power of Compounding
It is the concept where your returns will start to earn returns. When your principal amount keep invested over a period of time and get some returns. Then after some time your profits generated will also get invested and make profits for you. It will help the investor to get the maximum profits for their investments. But keep in mind that power of compounding will work when you keep invested for a long duration and profits will be directly proportional to the invested duration.
- Affordable Low investmenty
When we are salaried then investment can be hard for us. In that case the instrument like mutual funds will be the best option for the people who wants to invest but they don’t have enough money. SIPs in mutual can be start as low as 100 INR (limited mutual funds are there) and investment can be increased gradually once there is increase in your income to get the maximum benefits. This will keep the investors motivated and regular in their investments.
- Easy to Handle
As I already mentioned, there are lots of online platform introduced to open your account and start the journey of the investment. These platforms are so much user friendly so that the investors can easily operate them even in their smartphones. SIPs in mutual funds will be very convenient as there is no need to involve any deep knowledge about the market, just a basic understanding can work to start. There is a team of specialist will perform that task for you to analyze the market and past of the stocks.
We are in a time where inflation rate is increasing in every country and in India it is around 5-7%. So, we need some opportunity to take a step ahead and beat the inflation to increase our profits. It is also true that investment in mutual funds means that your principal amount will also work and earn money for you. Enjoy your investments!!
