What are the Benefits of Systematic Investment Plan (SIP)? - Investallign

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What are the Benefits of Systematic Investment
Plan (SIP)?
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Benefits Of SIP
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What is Systematic Investment Plan (SIP)?

• Systematic investment plan or SIP is as the name
  suggests an investment plan in mutual funds in
  which an individual can invest a small amount of
  money on a pre-set date every month in a specific
  funding company of their choice.  It is one of
  the best ways of putting your money in equity
  mutual funds as it sets a discipline in
  the investor. SIP works on the principle of
  regular investment and is similar to recurring
  deposits. SIP allows investors to invest in
  mutual funds with small amounts that get deducted
  from your linked bank every month. SIP allows
  investors to buy units every month irrespective
  of markets trends. In simple terms SIP enables
  investors to invest in stock market in particular
  mutual fund in periodic monthly investments
  instead of one time investment in mutual funds.
  As an investor you must know what the benefits of
  SIP are and how it can help you build income.

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Advantages of Systematic Investment Plan (SIP)

• Disciplined Approach To Save
• SIP inculcates a disciplined approach in you to
  plan your monthly budget and put aside some money
  for SIP. This way you form a habit to ensure that
  your bank has sufficient funds every month to
  invest in SIP. Regular investment sets a
  discipline in you and builds your wealth.
• Helps You Achieve Your Goals
• SIP helps to achieve financial goals as you can
  start investing small sums of money. While the
  amount can be as small as Rs. 500 per month, the
  benefit from the power of compounding on monthly
  basis eventually leads to accumulating the
  required corpus for reaching your goals. It helps
  you to build your wealth over a period of
  specified time.

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• Compounding Benefits
• It is widely being said that the key to building
  wealth is to start investing early and to keep
  investing regularly. When you invest a small
  amount of money in SIP, it grows to large amount
  of savings. This helps in creating a substantial
  amount of wealth which includes your own
  contribution, plus returns compounded over the
  years. An investor who starts investing in the
  SIP at an early age certainly stands to gain more
  than an investor who starts to invest in later
  age. For example we take A B as investors and
  lets assume A is younger to B by 5 years. At an
  age of 20, investor B starts to invest Rs. 1000/-
  in SIP and investor A starts investing same
  amount at 25 years of age. Assuming both these
  investors invest for 30 years and investment
  yields a return of 12 percent, investor B will
  get 30 lakhs at end of investment whereas
  investor A will get only 16 .8 lakhs. It is thus
  best to invest in SIP as early s possible.

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• Takes Advantage of Rupee Cost Averaging
• In equity or stock market it is never easy to
  guess when it is right time to invest. You cannot
  be sure which time will the market go up and this
  is where investing SIP becomes important.  Rupee
  Cost Averaging is an effective investment
  mechanism which eliminates the need for you to
  time your investment in the market. All you need
  to do is to invest a fixed pre decided amount of
  money on a pre-set monthly/quarterly/yearly
  basis. You dont need to worry if the stock
  market is up or down as you buy more units when
  the price is low and fewer units when the price
  is high. Hence whether it is a bull phase or bear
  phase, the cost of investment remains same at
  lower level which allows you to get maximum gains.

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• Simple, Convenient Easy to Monitor
• Investing in SIP is a hassle free process as you
  do not need too many paper works. Once you fill
  in your application form, all you need to do is
  provide post dated cheques or link your bank to
  auto debit the amount from your bank. To track
  the progress of your investments, you are
  provided account statements at periodic
  intervals. And now days you can also follow the
  same process online as well. All you need to do
  is choose an equity fund company in which you
  want to invest and invest in it directly through
  their website.
• An Easy Investment Plan
• SIP is an easy investment plan as do not need to
  shell out lump sum money from your banks. You can
  start investing with a minimum investment amount
  also as SIP investments are flexible and there
  are no penalties if you wish to end the SIP at
  any given time.

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• Considering various benefits of SIP it is only
  wise to put your money in right use and start
  investing in SIP. Simply opt for a specific
  amount in a funding company and see your money
  grow over the coming years.
• Also Read
• Is it good to invest in IPO?

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