Life is full of uncertainty. We don’t know what lies around the corner, all we can do is predict. But does doing that really solves the problem? The best way to deal with the changes is by being ready to face it.
For example, if one day some financial emergency occurs, what would you do if you don’t have any savings? You will be stuck. Therefore, saving is important to deal with financial emergencies. But due to increasing financial liabilities and inflation, it becomes tougher to save a huge sum of money all of a sudden. This is where SIP steps in.
Among many saving options, one is mutual funds. Sip is a mode of investing in mutual funds where investment is made on a regular basis in the form of small installments periodically. It is similar to a regular saving option provided by banks like a Recurring Deposit. It stands for Systematic Investment Plan which means a plan that helps you plan systematically. You can invest both offline and online.
Benefits of SIP for a Common Man:
Saving Habit - SIP helps create a saving habit slowly and gradually at a consistent pace. It is really good for starters and for those people who are willing to save money only in small bits owing to continuous financial liabilities.Long-Term Benefits - When we invest for a long term, the gain tends to be more as compared with short-term or medium-term investment. It is a common observation that investment in SIP is more inclined to deliver higher interest in the long term.Rupee Cost Averaging - SIP deals with market volatility. When the rate is high, less units are added to investors’ account and when the rate is less, more units are purchased. Thus, the investors benefit from the facility of Rupee Cost Averaging.Disciplined Investment - Systematic Investment Plan helps in continuous accumulation of wealth. It makes an investor disciplined in terms of saving. Investing continuously in small amounts can bring out better results as compares to lumpsum.Compound Benefit - It is one of the great features of SIP that it provides compound benefit. For example, the market value at which you purchased a unit is Rs. 15 and the rate of interest is 15%. The NAV goes up and now the same unit is of Rs. 20, so now the interest will be provided on Rs. 20 instead of Rs. 15. This is the compound benefit that the interest is provided on the unit’s market value that keeps on changing from time to time.Flexibility in Investment - There are many options available in the market with respect to SIP. There are plans available with a variety of time periods, rates, etc., from which you can select, according to your pocket.Indirect Stock Market Participation - People who wish to invest in stock market but are scared of the risk that comes along can invest in mutual fund. It provides an indirect safer opportunity to become a part of stock market.Why Invest in SIP Online?
Hassle - Free Dealing - Investing in SIP online helps in a hassle free dealing as no paperwork or any other formalities are needed to be fulfilled which generally make the process complicated.Unbiased Solutions - Online platforms are unbiased because they provide the most suitable plan according to your portfolio rather than promoting a specific plan for personal gains.Time Saving - Investing online is definitely time saving as one doesn’t has to travel to a mutual fund office, consult an agent, or do any kind of paperwork.Cost Saving - As it saves us from traveling or getting any advise offline, it helps in cost saving which otherwise would have been required.Convenience - Applying in SIP online is simple. Select your plan, check the details and pay. You can do it all simply by sitting in your very own chair.Compared to other options like recurring deposit, SIP provides a better rate of interest. So, if you are want to invest in small bits, SIP is exactly what you were looking for.
About the Author
Dishika is well-versed with the ups and downs of the financial market and has published articles on mutual fund and SIP. She is associated with MySIPonline.com, which is an AMFI registered mutual fund company.
