7 Reasons Why Beginners Should Start their Investment Journey with SIP

As a working professional, entrepreneur, or self-employed businessman, you rarely have the time or resources to invest in equity directly. This doesn’t mean that you cannot benefit from the gains of the stock market.

Opt for SIP. Systematic Investment Plans (SIP, in short) are a convenient way to invest in the stock market via mutual funds. In SIP, you have to invest a fixed sum of money every month in the mutual fund scheme of your choice.

Here a few reasons why experts recommend SIPs as the best investment tools for amateurs and beginner investors.

1. You can get started with even small amounts

Unlike other investment options that require you to invest bulk amount, SIPs let you begin your investments with an amount as little as 500 rupees every month. This is great for newly-employed and young professionals, who don’t have significant savings right now.

2. You Can Increase your SIP Amount Easily

If you start earning more or receive an unexpected cash bonus, you can increase your SIP amount or start a new SIP plan with ease. You can either choose to invest in your original MF or look at other MFs of your choice. Flexibility is one of the biggest benefits of SIP that makes it so attractive to new investors.

3. You can Stop the SIP at Anytime

Unlike other investment options like recurring deposits that come with a penalty for premature closing, SIP plans don’t have any fines associated with them. You can stop the SIP at any time you desire. You can then either decide to get back your investment or let in remain invested in the mutual fund, till you wish to get it back.

4. It teaches the Habit of Disciplined Savings

One of the biggest complaints among young professionals is that they aren’t able to save any money, irrespective of their income levels. The truth is that the more you earn, the higher you’re likely to spend. This is why experts often insist that one should spend only after saving.

With a SIP investment, you make a regular saving every month, without giving any excuses. Also, by setting your SIP date to the day after you receive your salary, you follow the age-old advice of investing before spending.

5. You Need not be Bothered with Timing the Market

Beginner investors often do not know to time the market accurately. With a SIP, you need not worry about the highs and lows of the market. Your mutual fund manager makes those decisions on your behalf. When the market is high, your SIP investment buys you less number of units. On the other hand, when the market is low, the same SIP investment gets you a higher number of units.

This ensures that you don’t have to pay high prices for any unit of an MF. This helps you reap the benefits of rupee cost averaging.

6. Reap the Benefits of Compounding

While investing in SIPs, you earn monthly gains. These gains are added to your original investment and are further invested. This way you make continuous monthly returns, and the profits themselves earn yields, which in turn compounds your benefits gained. This leads to exponential growth of your investments, thereby making SIPs as one of the best investment for beginners looking to save more.

7. You Learn to Isolate your Investment Decisions and Emotions

Very often, new investors in the stock market panic when they see massive fluctuations in the market. Seeing the constant ups and downs of the market, makes them take impulsive decisions, which they end up regretting later. With a SIP, you stay invested no matter what happens to the market. This helps you to protect yourself from short-term volatility.

SIPs give you the best of both worlds. You can enjoy the returns of the stock market, without having to deal with the pressures of continually timing the market. With an array of benefits, it’s no surprise that SIP has emerged as the leading investment tool for young investors.

If you are planning for a long-term financial goal, a mutual fund Sip that suits your objectives and your surety of getting exceptional results can be an excellent option.