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4 Advantages of SIP Investment     

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Whether you are looking forward to achieving a certain large financial goal or build wealth, regular investment is the key. This is the reason systematic investments are high on the rise for the last few years. When it comes to investing in mutual funds in India, SIP or Systematic Investment Plan seems to have become very popular. You can either go for a one-time payment / a lump sum or invest a fixed amount of money regularly in a mutual fund every month (SIP). Systematic Investment Plan is a well-defined method that proves to be an effective mode of investing in mutual funds as it offers manifold benefits. Let us have a look at some of the key benefits of investing in mutual funds through SIP. Systematic Investment Plan or SIP is a method of investing money in mutual funds.

  • Disciplined Investing- SIP investments are made at regular intervals. A fixed amount gets debited for a specific amount from your bank account on a specific date, and the amount is invested in the scheme you choose. This kind of systematic investment surely brings a disciplinary approach to your investment and proves beneficial in achieving your long-term investment goals.
  • Start Small– Investing in large lump sum amounts might not be possible for everyone. However, SIP spell in terms of being pocket friendly as one can start with as little as INR 500 per month. Also, one can choose to go for weekly, monthly, quarterly, or annual SIP depending on his/her financial conditions. Though the investment amount is low, it helps inculcate a regular and disciplined saving approach, proving helpful in the long run.
  • Compounding effect- Investing for the long-term makes you build a higher corpus due to the compounding effect. Simply put, you earn profits by investing your profits. Your mutual fund returns are reinvested in the same scheme to maximize the profits. Thus, you can earn more with a compounding effect. To maximize the compounding effect in mutual funds, start early and keep investing for a long time. Thus, your investments can grow further in the long run like a snowball effect. In short, the exponential nature of SIP returns increases your potential returns manifold.
  • Rupee cost averaging- this is the key advantage of systematic investment plans. In simple words, you accumulate lesser units when the NAV (Net Asset Value) of the fund is high and more units when the NAV is low. Thus, it averages out your total holdings over the tenure of the investment period, and you can get higher returns on your total principal amount.

SIP proves to be a beneficial and convenient method of investing for investors of all ages. You can talk with professionals or check out SIP return calculators online. SIP calculators are smart online financial tools that help you find the return value of your mutual fund investments and SIP value. Start as early as possible, choose the right mutual fund scheme and SIP wisely, and you will surely enjoy manifold benefits in the long run.

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