Why SIPs are a great way for a paid worker to invest | Motilal Oswal
Why SIPs are a great way for a paid worker to invest | Motilal Oswal

SIPs great way for Paid Workers to Invest

Introduction

A systematic investment plan, commonly referred to as SIP, is a seamless and hassle-free channel for investing in schemes. Following a SIP involves investing certain sums at regular intervals. For salaried individuals, their monthly salary allows them to set aside some money on a regular basis, some of which can then be invested. Thus, rather than investing in a lump sum, it is better for salaried professionals to invest in mutual funds via SIPs. 

How Are SIPs Beneficial for Salaried Professions?

Rupee-cost Averaging

Investors in the equity market need to be prepared for volatility at all times. However, SIPs allow you to rest easy without having to worry about entering the market at the perfect time. Rupee-cost averaging lets you avoid this stage as a regular investor. With rupee-cost averaging, you invest a fixed sum of money at periodic intervals regardless of whether the market is on the rise or decline. Thus, despite volatility, you buy more units when the market is going low, and fewer units when it is high. 

Compounding

Compounding is a very simple mechanism but carries great rewards. It essentially refers to when your returns start accruing more returns themselves. When returns from investments are reinvested, they can earn even more. If you have just started earning, you will have a longer investment tenure and can make the most of compounding as you have an early start. 

Discipline

Following SIPs requires you to invest a fixed amount at intervals, creating a regular investment and savings pattern. As a successful investor, discipline is key. Over time, large-cap schemes can bring returns that are as good as those from recurring deposits or fixed deposits. 

Convenience

SIPs take away the complications and hassles involved in investing. Standing instructions can be issued to your bank for auto-debits, at desired intervals. Beyond following the plan, there is not much additional work you need to do. For a working professional, this is a huge relief. 

Flexibility

It is generally advised that SIPs be taken up for the long term. However, you still have the option to discontinue it anytime, reduce the investment amount or increase it as needed. 

SIP Tips for Salaried Professionals

Here are a few tips that can help you optimize your SIP investments :

  1. Set the SIP date near your payday so you are able to save some money before spending any.
  2. If you pay income tax, opt for tax saving schemes under mutual funds to get deductions of up to Rs.1.5 lakh.
  3. For a long-term vision, you can go for large-cap schemes which offer strong returns over a longer duration.

To Sum it Up

A systematic investment plan can go a long way in helping you achieve success as an investor. For short-term goals, it is advisable to invest in low-duration or liquid funds. Meanwhile, hybrid or debt funds that invest in fixed income instruments are a better choice for medium-term goals. Lastly, for long-term goals, you can invest in large-cap equity funds. By investing in SIP  working professionals can enjoy great returns without any additional worries.

Related Aritcles:

How to Analyse Mutual Funds for Big Returns | Things to Know Before Investing in Mutual Funds | Mutual Fund - Need of Financial Plan | How to Open a Demat Account Without a Broker | Factors to Keep in Mind While Opening a Demat account 

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