Let’s learn about SIP before jumping to the benefits of investing through it in mutual funds. It stands for Systematic Investment Plan, which works by depositing a certain sum in an investment scheme at regular intervals. So, if you pay instalments via this plan, a particular amount is transferred to the investment scheme from your account at the chosen intervals on a fixed date.
After years, when you’re better off, you can increase your SIP investments using an automatic feature. That’s top-up or step-up SIP.
Through this plan, you can up your investment by a specific amount every year. That can be ₹1000 in 2022, ₹1000+10% in 2023, and so on. Whenever you need a rough estimate of the total corpus to be accumulated, consider using an online step-up SIP calculator with values of your initial investment, SIP tenure and your expected returns.
Top 5 Advantages of SIP in Mutual Funds
Disciplined regular investments
The best thing about SIP is that it lets you invest at fixed regular intervals, which can be monthly, quarterly or bi-annually. So, you can invest consistently in a disciplined way. That way, you can commit to saving regularly for a long-term goal and increase the chances of attaining it.
Rupee cost averaging
SIP works with this concept to protect your investments against market volatility so you can beat market fluctuations. When the stock prices go down considerably, SIP allocates you more units. Likewise, when the prices shoot up, it allocates you fewer units. Thus, your savings are averaged out.
It’s also convenient to invest in mutual fund services via SIP. You can just request your bank to initiate automated transfers at fixed intervals from your account to the chosen investment scheme. Thus, you can save the effort and time of making manual payments. Besides, you’ll never miss out on your investments.
Good Long-term Returns
SIP helps generate exponential returns over a long period with the power of compounding. It reinvests your interest earned. So, you get additional interest on the already accumulated interest and the principal amount. Thus, your returns grow manifold over time and thus helps finance major long-term goals like funding your child’s education.
You can accumulate more wealth by opting for a step-up SIP plan. Keep using the step-up SIP calculator with the initial investment amount and other necessary values to check the estimated total corpus that you may accumulate.
Investing in SIP for a long tenure means generating high returns. However, in case you can’t continue with your investments for some reason, you’re allowed to stop them anytime during the investment cycle.
If you start saving or earning more, you can even go for a new SIP plan in the same or a new mutual fund.
In case your account balance is inadequate for investment in a certain month, you can still keep on investing in the following months. No fines or charges would apply.
Consider beginning to invest early in mutual fund services through SIP so you can earn enough returns to fund your long-term goals.