SIP has long been known as a trustworthy and best way to invest in mutual funds. Everyone, whether a newbie or an experienced investor, recommends starting SIPs because it is the most convenient way to invest in mutual funds. In this article, we have given 10 sound reasons to start SIP to get the most out of your saved money.
You can always start small with SIP:
One step is all it takes to go a thousand miles. Similarly, you don’t need a large sum to start your journey of creating wealth. You can start with as little as Rs. 500 per month. So, no more waiting for sufficient funds, as the investment amount is inexpensive and better for millennials than any other investment plan. If you are in your twenties or have recently started working and earning a regular income, a SIP is the best way to kick start your investing trek toward your financial hike.
No longer fret about market volatility:
If you invest consistently through SIP, you invest throughout the market cycle. As a result, when markets fall, you get more units at the same price, and when markets rise, you profit more from the extra units you obtained during the corrections.
Get flexibility while investing:
SIPs are a great investment scheme for any investor because they are highly flexible. You are not required to invest your money each month for a specified amount of time. If you are unable to keep going with the SIP, you can skip or stop it. You can also change the amount and duration of your SIPs to meet your goals. For example, if you want to invest Rs 500 in a mutual fund scheme of your choice, you are not required to invest the same amount forever. If you have money, or if your earnings or savings capacity increases in the long term, you can increase the SIP amount, or you can start investing in a new scheme of your choice.
Diversifies your investments:
SIP allows you to diversify across asset classes, whether you are investing in individual funds or a fund that invests across multiple asset classes, even if you only invest a small amount. Your risk is diversified as you invest in multiple holdings. In addition, you can also spread your investments out over the month. Suppose you have three different SIPs spread across funds and asset classes, each with a different monthly deduction date. As a result, you reduce your risk of market timing. Selecting different dates reduces your exposure to adverse market movements within that month. Thus, it allows true diversification of investments, not only across asset classes but also across time. A well-diversified portfolio is essential for long-term wealth creation.
Enjoy rupee cost averaging:
The simple investment principle of “buy low, sell high” is quite hard to execute. SIPs allow for regular, timed investments. Thus, with a SIP, you can average out your rupee cost of investment and protect it from market ups and downs. Because you are systematically investing small amounts, you end up buying more units in a down market and fewer units in an up market. As a result, market cycles will have the least impact on your investment. Also, as you invest a fixed amount each month, “averaging” is relatively easy.
You get the power of compounding:
Compounding occurs when the returns on your investments begin to earn returns. The idea behind this is simple. However, the practical implications are significant. Your returns get reinvested when you make consistent investments through SIPs. It can have a snowball effect over time, increasing your potential returns significantly. Investing for an extended period is an excellent way to maximize this gain, which means you may benefit from investing as soon as possible. A ten-year head start can have a significant impact on your returns.
Safest and secured:
The mutual fund industry has been steadily growing in India as more people begin investing with the expectation of higher returns. The market regulator, the Security, and Exchange Board of India (SEBI), and the Association of Mutual Funds in India (AMFI) have taken several strict measures to protect the returns and interests of all investors, and every mutual fund scheme, AMC, or mutual fund house must adhere to these policies. It has made the mutual fund industry completely safe and secure for investors who have started investing in SIPs or are thinking about doing so.
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