5 benefits of investing in Systematic investment plans

A systematic investment plan or a SIP is a smart and convenient way of investing money in mutual funds. Through a SIP, an investor can easily make investments of a pre-determined amount at regular intervals (weekly, monthly, quarterly etc.). This type of investment is a planned approach towards investments, and they help an individual inculcate the habit of saving and building wealth for the future. A SIP mutual fund allows an investor to invest a fixed amount in mutual funds. The pre-determined amount will be auto-debited from an investors bank account and invested in selected mutual funds making the process of investing convenient for the investor. If an investor is interested to invest in short-term market instruments like treasury bills, government securities they can opt for liquid mutual funds. In SIP investments, a pre-determined amount will be deducted from the investors account on a specified date and the amount will be invested in certain mutual funds.

5 benefits of opting for a SIP investment are listed below:

  1. Taking advantage of rupee cost averaging:

The rupee cost averaging is an effective investment strategy which eliminates the need to time a market. All an individual has to do is to invest a fixed pre decided amount of money on a regular basis for a long period of time. As the amount invested is constant, an investor buys more units when the price is low and few units when the price is high that may lead to a low average cost.

  1. Simple, convenient and easy to monitor:

An investor will not need to take time from their schedule to make their investments. With a completed application form, an investor can submit their post-date cheques or talk to the fund managing company, then the amount will be auto debited from the investors account. Investors can monitor their progress of investment through periodic statement of accounts.

  1. Disciplined investing approach:

A lot of investors may opt for stock options by understanding the working condition of the market. However, this process will require the investor to have great market knowledge, research and technical analysis and a lot of time investment from the investors end. But, if an investor has a disciplined approach towards regular investments, they can stop worrying about when and how much they should invest. This eliminates an investor’s need to actively track the market. A SIP investment will help an investor do that.

  1. Benefits of compounding:

One of the keys to building great wealth is to start with a SIP investment investing early and to keep investing on a regular basis. A small amount of money which is invested regularly can grow to a large sum. This helps in creating a substantial amount of wealth that includes an investors contribution, with returns compounded over the years.

  1. Power of starting early:

A SIP investment is beneficial for an investor as if the investor starts with the regular savings, it becomes easy for wealth creation. When an investor decides to start investing in SIPs early, this helps in building a portfolio.

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