A SIP has the potential to reap the benefits of the returns offered by Capital markets without stressing over volatility or availability of large lump sums to invest.
Capital markets have been highly volatile in the past few months. Investing into a Systematic Investment Plan (SIP) helps you beat market fluctuations and at the same time offers the power of compounding on your earnings, making it an attractive avenue to inculcate the discipline of saving.
A SIP is a kind of investment where you can set aside a fixed sum of money at regular intervals towards a savings scheme. For an average investor, timing the market to see the right time to enter and exit is tough. SIPs invest into Mutual Funds that track market conditions to take this decision for you.
Furthermore, the amount of money to be invested, the frequency of the investments and the date when your account is debited, can all be preset to suit your requirements, making it a flexible option.
To help you make an informed investment choice, we have put together the benefits of investing into a SIP.
Build a corpus
You can start a SIP with as little as ₹500, which you can set aside each month to start the habit of saving. This is a great option for those who are starting out but looking to build a corpus, as you don’t need a lump sum to invest. A SIP allows you to choose the amount you wish to save along with the frequency of every instalment – whether bimonthly, monthly, quarterly or yearly. The money is automatically debited from your bank account and invested into the selected Mutual Fund schemes.
Convenience of investing
The process of money transfer is completely hassle-free. All you need to do is pre-select the date of transfer for each month and give standing instructions on your bank account to initiate the money transfer. You don’t need to physically go to the bank to transfer the funds at the time of every transaction. This is over great value in today’s times when we are trying to go contact-less and these tasks can be taken over by technology.
One of the other benefits offered by a SIP is rupee cost averaging. In simple terms, it means that when the Net Asset Value (NAV) is high, the fixed amount that you have allocated towards the SIP can buy lesser units of the investment as against times when the NAV is low. So, over time, the average cost of your holdings averages out as the number of installments increase over time giving you the opportunity to earn higher profits on the total amount thus invested.
Power of compounding
As you remain invested for the long term, you are able to earn greater profits due to the sheer power of compounding. SIPs are good option for beginners who want to get into the discipline of savings and also have the capacity to see their investments grow over the long term to get the full benefit.
It gives you a diversified portfolio that reduces the risk of volatility in the stock markets, yet offering the chances of higher rate of returns when there is an upside. Ideally, the rate of return on your investment must beat the existing inflation rate. A SIP offers the option to park your money into varied schemes, offering a diverse mix of industries.
Gains from capital markets
To invest into stock markets, one needs to have a large sum of money set aside to purchase different kinds of stocks. But, a SIP allows you to get the gains from an investment in Capital markets without having to directly own individual stocks. A SIP invests into mutual funds, which in turn puts the money into stock markets thereby helping you reap the benefits of a growing economy.
Even though you are exposed to the stock markebrt, your money remains in the hands of a qualified professional, taking away the need for you to monitor the market on a daily basis and decide what to keep and what to exit
So, what are you waiting for? Invest in a SIP today!
This is an investor education and awareness initiative by Axis Mutual Fund. Investors have to complete one-time KYC process. Visit www.axismf.com or contact us on email@example.com for more information. Investors should deal only with Registered MFs, details of which are available on www.sebi.gov.in - Intermediaries/Market Infrastructure Institutions section.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.