For a person just stepping into the world of finance and investing, the amount of data and information one needs to read through can be overwhelming. One has to learn to study balance sheets of companies, learn what financial ratios indicate and study the market to find a decent entry point. This can be very tough for people with limited time on their hands. Luckily, there are ways to work around the same and invest in financial instruments with the help of experts who are doing all of the mentioned due diligence. The easiest way for an investor to do this, is to invest in a mutual fund. Here, a fund manager is continuously studying the market and various companies, and making informed decisions so that your money grows and compounds over time.
Yet, most people lack the means to invest a big sum of money right away as this may be required for various expenses and needs. The simplest way around this is a Systematic Investment Plan (SIP plans). Here, a fixed amount of your choice is automatically withdrawn from your bank account and invested in the mutual fund of your choice. This way, small amounts add up to a big investment over time.
Advantages of SIP investment:
1. You do not need a high amount of capital: One can start your investment journey with as little as Rs. 500 per month. This is beneficial to a lot of individuals who can set a part of their salary/income aside every month. This way, one does not need to invest a huge amount of money in one go.
2. Tiding over volatility: Since purchases through SIP investment plans happen every month, the investor is purchasing mutual fund units across a market cycle. This averages out the cost of purchase and helps tide over the market’s inherent volatility.
3. Inculcates disciplined investing: Once you decide to purchase SIP for long term growth, you as an investor know that no matter what, a portion of your money is going to get invested. This helps you budget your other expenses and makes you a more disciplined investor, which is a recipe for long term financial success.
Hence, long term SIPs should be on every investor’s checklist. When combined with smart fund selection, SIPs help one’s money compound over the long term, ensure a disciplined approach and help in building long term wealth. Before setting up an SIP, it is important to calculate the amount you would need to meet your financial goals and then back-calculate the amount you would need to invest in your SIP accordingly. This makes sure that your long term financial goals are met. It is now simple to open sip online and start your long-term investment journey towards financial freedom and success!
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