Decoding Systematic Investment Plan For Effective Financial Journey

One of the biggest myth around investment planning is that investments are just for the wealthy, upper class who have a significant amount in their savings bank account. One cannot be more wrong. You can easily invest in mutual funds in a systematic manner through a systematic investment plan (SIP). Mutual funds can prove to be a useful financial investment option to begin your investment journey. This article aims to decode SIPs to ensure an effective financial journey.

What is SIP?

SIP is a systematic investment tool to invest in mutual funds. It is a godsend avenue for those who wish to multiply their capital efficiently, without parking your entire savings in one go. Under this mode of investment, an investor dedicates a pre-determined sum of money in particular mutual fund schemes for a defined period of time on a regular basis. The periodicity of the investments can be daily, weekly, monthly, annually, according to the convenience of the investor. Several mutual fund houses and AMCs (asset management company) offer this facility to investors to invest in a disciplined manner.

Let’s understand some of the benefits of SIP and why you should consider this investment avenue to effectively manage your financial journey:

Benefits of SIP investment

Following are some of the benefits of investing in mutual funds via SIP:

  1. Timing the markets

Investors are always in the quandary about the apt time to make investments. The truth is it is not humanely possible to always predict the volatile markets and understand their high and low points. Investing in mutual funds via SIP solves this dilemma as it periodically invests across varying market cycles. Hence, SIP nullifies the need to time the markets.

  1. Power of Compounding

You must have often heard the advice of beginning your investment journey as soon as possible. Do you wonder why? It’s because of the power of compounding, also referred to as the eighth wonder of the world by most experts. Under this concept, your money works to create more money for you. Thus, the earlier you begin your investments, the more you benefit from the power of compounding.

  1. Rupee Cost Averaging

As discussed, investments via SIP are made irrespective of the market condition. As a result an investor ends up buying lesser  when the markets are high and vice versa. This is commonly known as rupee cost averaging.

  1. Ease of investing

Through SIPs, you can easily invest in mutual funds online. An investor can invest in SIP with an investment amount as low as Rs 100 per month.

Note that SIP is not a financial product in itself – one does not invest in SIP, but invest in mutual funds via SIP mode of investment. Make sure that you choose your mutual funds after carefully assessing your financial goals and ensuring that it aligns with your financial portfolio. You can also use an SIP calculator to understand the future value of your investments. Happy investing!

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