A financial journey ought to begin by setting a goal. A lot of us save or invest our hard-earned money without any specific financial goal in mind, and hence pay the price in terms of lower returns on their investments. A financial journey can’t be given up on, just because one’s goals seem remote, or there are difficulties on the way. One cannot just take the first step towards financial independence and expect their goals to be met on their own. One must take one step after another to attain financial liberty eventually. One’s financial goals are only achieved after taking several relentless steps. This continuous journey can be referred to as regular investing or systematic investment. This mode of investment in known as SIP, commonly known as systematic investment plan.
What is SIP?
SIP is a method of investing in mutual funds. Under an SIP investment, an investor invests a fixed amount of money in their preferred mutual fund schemes at pre-determined intervals for a specific period of time. The investment amount can be as low as Rs 500 per month. The periodicity of the intervals can be daily, weekly, monthly, quarterly, semi-annually, or annually.Investors invest in SIP to invest in a time-bound manner without fretting about the market dynamics. By taking the SIP route to investments, one is also benefitted from rupee cost averaging and the power of compounding.
Why should you invest in SIP?
There are several reasons to invest in SIP. For starters, it imparts financial discipline in the life of investors. It also helps to invest regularly without wrestling with index level, market mood, etc. The money is automatically invested in your desired mutual fund schemes regularly without any effort on your part.
SIPs help you to average your buying cost of mutual fund units and maximise returns. When you invest regularly over a defined period irrespective of the market conditions, you are bound to get more units when the market is low and fewer units when the market is high. This averages out the buying cost of your mutual fund units. This concept is known as rupee cost averaging.
Another benefit, which is also referred to as the eighth wonder of the world is the power of compounding. When you invest for a long time, your returns start to earn returns on their own. This is known as compounding. In short, your money works to make money for you without your efforts. This helps you to build a significant corpus which further help the investor to achieve their long-term financial goals with regular small investments.
As an investor, you can use an SIP calculator to understand the returns earned on your SIP investments over a period. An SIP return calculator tells you the future value of your investments. It is always advised to start as early as possible as you are benefitted from the power of compounding the longer you stay invested. Remember, slow and steady indeed wins the race. Happy investing!