Things you should know about SIP (Systematic Investment Plan)

In the current time, uncertainty is the biggest issue we all are dealing with. COVID-19 pandemic has greatly affected budgets on a small scale, such as yours and mine as well as on a larger scale like the nation’s economy. As a result, we have become aware of how important saving becomes in times of need. Today there are smart saving options like mutual funds, SIPs, Stocks, etc that can help us build our wealth in the long run. However, SIPs are increasingly becoming popular among young investors. SIPs come with many investment strategies that are tailored to your financial goals. Having said that, let’s have a clear view of SIPs and why we should consider it.

What is SIP?

A Systematic Investment Plan is a facility offered by mutual funds to the investors to invest a set fixed amount of money in a mutual fund of their choice at a predefined interval. For this purpose, you don’t need a lump sum money to start, all you need to do is set a small amount aside. This will also improve your financial habits in the long run.

How does it work?

Investing in a mutual fund every time means that you are purchasing a certain number of units of the fund corresponding to your sum. Here, there is no need to evaluate the market each time you invest. You can always purchase more units when the market is down compared to when it is soaring high. The Net Asset Value (NAV) is updated daily, but the cost of purchase may vary with every investment. Eventually, the cost of purchase averages out and usually falls on the lower side.

What are the benefits?

  • Power of Compounding-

The benefits are multiplied when an investment is done on a regular interval. This is known as the compounding effect. It ensures that you are not only gaining on the principle that you invest, but you also earn interest on your interest.

  • You can start small-

 You can start with as little as Rs. 500 and then increase as per your convenience. With many financial tools like a SIP investment app, you can start your investment journey in no time. Moreover, they help you learn as you grow as an investor.

  • Convenient-

You don’t need to wear out your eyes learning about the companies you want to invest in. SIP is way simpler, all you need to do is invest in a disciplined and phased manner. Tools like the SIP Investment app also suggest investment opportunities based on your financial goals.

  • Starting early benefits-

 You will have an edge over others by investing earlier. The earlier you start, the easier it is to achieve your goals.

  • Acts as an Emergency Funds-

There are not many risks in SIP, so your investment can be used during the time of an emergency. You can redeem your investment whenever you need it, and most investments align with modern GRC ordinances, which mimizes risk.

Investments may seem tricky, considering the jargon and financial trends. This is simplified today by smart instruments like the SIP investment app and other financial apps. They help you learn and give you a personalized investment experience.