Reasons Why SIPs Could Be the Best Investment Option for You

A Systematic Investment Plan (SIP) is a route offered for mutual fund investments. SIPs are different from investing with a lump sum amount or a one-time payment. In an SIP, you contribute a fixed amount of money to a mutual fund each month. The money you allocate monthly for the plan is automatically withdrawn and invested from your bank account.

As per an August 2021 report by Financial Express, a financial daily, the Indian mutual fund industry has been witnessing an impressive growth, with an increase in mutual funds SIPs being the driving force behind this growth. Since June 2020, the SIP AUM has grown by 60%.

So, what makes SIP as one of the popular options among investors? What investment benefits make SIPs so beginner-friendly?

Reasons to Opt for an SIP

Terminate Your SIP Plan as Per Your Preference

There are zero penalties even if you want to stop your SIP investment plan by simply opting out of it. This is an advantage over quite a few investment vehicles, which charge a penalty if you opt out prematurely. Post opting out, you can either redeem the amount or reinvest it in the mutual fund.

Skip SIP Payments Without Any Hassle

Let’s assume you do not have the necessary balance in your bank account for your monthly SIP. The scheme allows you to pay the following month without any hassle or penalty. This is not the case with other investment avenues like recurring deposits.

Save More Money with a New SIP

Once you earn more and save more, you may begin a new SIP with the same mutual fund house or a different mutual fund scheme.

Inculcate a Habit of Saving

When you set your SIPs immediately after receiving your income, you invest even before spending. This helps in inculcating a habit of saving.

Low Minimum Investment Options

For SIPs, you can start investing with an amount as small as Rs. 500 a month. There are certain platforms that also offer SIP plans for Rs. 100. This increases the reach of prospective investors to mutual funds. No matter how small your savings are, you can compound your growth via SIPs.

No Checks on Timing Required

When the market is at an inflated level, your SIP can buy you fewer unit shares of a mutual fund. During low market conditions, the same amount will buy you more shares. This helps in averaging the rupee cost of a share in the long run.

The Compound Interest Effect

Investing in an SIP gives you certain returns every month. Those returns are, in turn, compounded to your initial principal investment and invested repeatedly. Compounding delivers exponential growth to the regular monthly SIP and its returns.

The points above give an exhaustive overview of mutual fund investments through SIPs. To know more about SIP investment tax benefits, SIP benefits and risks, and how to invest in mutual funds, it is always advisable to consult an expert and take smart investment decisions.

Reach out to one today and begin your investment journey!