7 Reasons to start a SIP
SIP is a tool for routinely and methodically investing in mutual funds. The fixed amount of money under this technique of investing can be as low as Rs. 500, and the predetermined SIP intervals can be weekly, monthly, quarterly, semi-annually, or annually.
When a portion of your funds is invested in your selected mutual fund scheme through a SIP, it is spread out over time as opposed to a lump sum investment. Because each mutual fund scheme has a specific goal, one must first list his financial goals before investing in mutual funds through SIPs. Therefore, you should begin your SIP investment as soon as possible for the following reasons:
Automatically Save Each Month
SIP is a terrific approach to guarantee that you save money each month. You develop financial discipline by making a certain monthly investment on a specific date. Even better, choose the start of your monthly SIP immediately following your salary date to start saving before you start spending.
Power of compounding
One of the most significant characteristics of SIPs is their power of compounding. Therefore, when you invest in SIPs, the monthly return is added to your initial investment, and then the amount gets reinvested. As a result, you can benefit from compounding with ongoing monthly SIPs and the returns they generate, which leads to growth.
Diversified Investments
SIP investing in mutual funds gives you the opportunity to invest in a variety of assets. As a result, it lowers the risk and increases your returns. As a result, investing in SIP offers you a diversified portfolio in addition to risk-free profits.
Flexible investment options
SIPs are, by their very nature, incredibly flexible. For example, when you have additional savings, you can increase the amount of your SIP. Similarly, you can decrease your monthly SIP investment or stop the SIP altogether. SIPs essentially lack a defined tenor. Additionally, you have the option of taking a complete or partial withdrawal from your investment, depending on your needs.
Investing in SIP is more of a discipline
SIP is a discipline more than it is an investment. This means that you must develop the habit of saving and investing at a young age. It frequently happens that two people with the same income level wind up with wildly differing levels of wealth. If one saves wisely through SIPs, the difference may appear. SIP compels you to save and invest for the future.
You can gradually increase your SIP contribution. Our income levels often rise with time, but most of us don’t raise our investments and savings correspondingly. Having more money permits you to spend more, but saving and investing more are equally important. And this can be done through SIPs successfully.
SIPs help lower your acquisition costs
Over time, SIPs lower your acquisition costs. The price of the investment matters a lot in any investment. The problem is that you don’t know when to buy. Selecting a SIP is the best option. A SIP will provide you with more value during bull markets and more units during bear markets. This rupee cost averaging (RCA) eventually works to your advantage to lower your overall cost of acquisition.
Your SIPs are your go-to in case of emergency
Because of the unpredictability of life, unexpected situations frequently arise. You can take a withdrawal from a mutual fund investment to cover an emergency, such as being laid off, being hospitalised, or any other emergency.
Mutual funds are among the easiest and most convenient ways to invest in the equity markets. SIPs assist you in systematic saving and help you avoid overpaying and keep investing a certain amount on a monthly basis. As you gain financial and investment discipline, experts recommend investing through SIPs.
