Stock markets have been highly volatile in the past few months. So, should an investor withdraw his mutual fund investments in such cases. Absolutely not. Market experts recommend investors to stay invested in the markets despite of market condition. However, if you are highly skeptical about the market volatility, you might consider investing in mutual funds via the SIP mode of investment. Systematic Investment Plan is an investment tool offered to investors to invest in mutual funds. This article aims to aware the investors about the potential benefits of investing in mutual funds via SIP mode.
Benefits of SIP investment
Following are some of the benefits of putting your money into an SIP:
No Need To Time The Market
Investors often have this perception of the ideal strategy of mutual funds is to buy low and sell high. Although not wrong, but this strategy is often difficult to adapt in practical times. This practice is known as timing the markets, a practice often frowned upon by investors. However, when you invest via SIP, you do not need to time the markets as regular payments are made against your desired mutual fund schemes
Rupee Cost Averaging
This is an extension to timing the markets. SIP mutual funds allow an investor to buy mutual fund units at varying market levels. As fixed and pre-determined investment amount is made towards mutual fund schemes, an investor ends up buying more units when the markets are facing a downturn, and vice versa. This concept is known as rupee cost averaging. Rupee cost averaging reduces the overall cost of the mutual fund units bought.
Power Of Compounding
‘The longer you hold, the higher benefits you reap’ – if you have stepped into the world of investing, you must have heard this phrase several times. This is because of a concept known as compounding. Also referred to as the eight wonder of the world, under this concept, the returns earned on your investments further invests to earn more interest. Basically, your money works to earn more money for you.
Instils The Habit Of Saving
As SIP investments allot a pre-determined sum of money towards specific mutual fund schemes on a regular basis, it inculcates a sense of financial discipline among investors. As a fixed amount is deducted from the investor’s bank on a periodic basis, they develop a habit of regular saving and investing which is necessary to achieve your financial goals and objectives.
Light On Your Pocket
SIPs busts one of the most common myths around investing in mutual funds that one need a dreadful amount of money to invest in mutual funds. However, that is not true. With SIP mode of investment, you can invest in mutual funds with an investment amount of as low as Rs 100 per month.
You can easily invest in mutual funds online via the SIP mode in a hassle-free manner. You can also use an SIP calculator to gauge the future value of your investments. Happy investing!