Systematic Investment Plans
Systematic Investment Plans is a simple concept, where you make recurring investments of a fixed amount in Mutual Funds at regular predetermined intervals.
SIPs allow you to achieve your financial goals through systematic saving and simultaneous participation in the financial markets. You can choose your preferred mode of investment as monthly, quarterly or annually and invest in a mutual fund according to your convenience.
Top reasons to invest in a Systematic Investment Plan are:
Rupee Cost Averaging - Combating volatility in Stock Market
Different instances in history seem to suggest that timing the market could be a difficult task for not only an average investor, but also for the savvier lot. Rupee cost averaging is a mechanism that eliminates the need to time one's investments. Here, one need not worry about where share prices are headed as investment of a regular sum is done at regular intervals; with fewer units being bought when the prices are high and more units when the prices are low. Although SIP does not guarantee profit, it has been witnessed in the past, that it aids in minimizing the effects of volatility on your investments.
The table below illustrates the benefit of Rupee Cost Averaging. It compares two investments over a period of 12 months, one through SIP and the other as a one-time lump sum investment.
The Power of Compounding
Power of compounding works on the principle of building wealth through reinvesting profits rather than spending them. By doing that, you can capture the future returns on your reinvested profits as well as on your original investments. When you choose the power of compounding, you choose a way to accumulate wealth better.
Disciplined Approach to Investments
Discipline is amongst the critical factors that could be associated with successful investment decisions. When you invest through SIP, you commit yourself to save regularly. Every investment is a step towards attaining your financial objectives.
While it is prudent to continue SIP investments with a long-term perspective, it need not be a compulsion. Mutual Fund houses provide investors with an option to discontinue the plan at any time over the period of their registered SIP.
There is a provision to issue a standing instruction to your bank to facilitate auto-debits from the corresponding bank account designated for making investments in mutual funds. This makes managing an SIP a relatively hassle-free mode of investment.
Systematic Investment Plans have proven to be an ideal mode of investment to fulfil a variety of short term and long term goals including planning your dream vacation, buying your dream home or paying for your children’s higher education.
So get started today by assessing your risk appetite and setting up a systematic investment plan to achieve your financial goals.
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