Why invest through SIP?: Large investments are not for everyone. Some investors prefer small and steady investments over a large amount at once. Sometimes large investments are not financially feasible for you. If that is the case, SIP is a suitable option for you.
Also, if you want to stay on top of your finances by cutting down unnecessary expenses and saving more, setting up a SIP might help you more than you would imagine.
On the road to becoming a disciplined investor is an important step called SIP. As the name suggests, a Systematic Investment Plan (SIP) offers you the ease and freedom of investing regularly in small amounts for a longer duration.
But first of all, let’s delve into the whats and hows of investing through SIPs.
What is a Systematic Investment Plan?
A Systematic Investment Plan (SIP) is like a sophisticated piggy bank for your investment. It allows you to invest a selected amount in a selected mutual funds regularly for a fixed period of time. In the case of SIP, the investor is free to decide the amount, duration, and frequency. The investor can also decide where to invest their money.
The money gets automatically deducted from your bank account, which goes to the mutual fund of your choice. So, when it comes to SIPs, choosing the right amount as well as the right fund is important.
SIPs are also about being disciplined, financially. SIPs offer a better savings scheme that you will give you better returns. If your goal is long-term financial security without burden, then SIP is the way to go.
What are the benefits of SIP?
- SIP gives you greater freedom over how much you want to invest and how often. No amount is too less. You can become an investor at even just a hundred rupees per month.
- You have the option to invest weekly, monthly or quarterly. Once chosen, the amount is debited periodically.
- SIPs have lower risk than lump sum investments. As you may know, lump sum equities are prone to market fluctuations and therefore more vulnerable.
- Perhaps the most important and unique feature of SIP is a concept known as Rupee Cost Averaging. When you invest regularly, you capture all the cycles of the market. Both the highs and the lows, not just one or the other. This cuts you loose from the constraints of market timing.
Even if the market is not doing well when you start investing, it gets balanced out eventually. There is no need to panic if the market drops. With time, it is supposed to even out.
- Compounding uses the simple principle of adding money added later to the principal sum. This makes your money accumulate over the period. It means the sooner the better.
How to set up SIP?
Setting up SIP online is as easy as it gets. To sign up for SIP online:
- Documents: Have all the required documents ready. A few personal documents are needed such as your PAN Card, a proof to verify your identity, Aadhaar and so on.
- Get your KYC done. Know-Your-Customer (KYC) is a one-time process that will help the organization to verify your identity. This is a crucial but easy step that mostly requires no paperwork. Once you complete KYC, you are free to invest as much as you wish in as many funds as you want.
- And sign up! Choose the fund of your choice after research and set up SIP that will be deducted from your account as you wish. If you cannot figure out the suitable amount, go to a SIP Calculator. Then select a duration and stay invested!
To conclude, if you are keen on your future being secure and safe, SIP ensures that you reach your goal. Not only does it give you secure returns in the longer run, but it also adds orderliness to your investment targets. Finally, there may be a number of ways to invest, but SIPs are by far the most convenient.