Systematic Investment Plan (SIP) is a type of investment method that is designed to put in money in a disciplined manner. This type of investment is generally preferred by those who want to invest in Mutual Funds, albeit at regular intervals and smaller amounts. SIP investments are such that one can contribute amounts at regular intervals for a specific period. It has become one of the most preferred investment options as it is very convenient for those who don't want to go in for one time Investment which has to be done in large amounts.
Investing through SIPs has its own benefits which are specified below for your clear understanding:
You are required to make regular contributions towards SIP investment plans over a period of time and the returns earned on these invested amounts are reinvested again, resulting in compounding. SIP allows you to utilize compounding to multiply your return of investment, even if the sum is at a lower end.
Saving consistently is a gargantuan task for many, and doing that systematically requires a lot of discipline. By opting for a SIP you can cultivate the habit of investing at regular intervals which makes you a disciplined investor. Moreover, a SIP gives you the freedom to invest at periods specified by you, which helps you to prioritize investment overspending.
Easy on pockets:
A majority of investors believe in lump sum investment, especially in Mutual Funds, which blocks a huge chunk of your money till the target corpus is reached. However, in SIP, you can start with small amounts which don't overburden your financial health. The investment amount can be increased as per your financial ability with time. This is undoubtedly one of the best types of investment vehicles which does not require one time huge amounts.
No Need to Keep Tabs on Markets:
This is perhaps one of the rarest investment methods which doesn't require you to time the market, and hence you don't need to worry about the volatility factor here. With SIPs your average the cost of purchasing is automatically taken care of as you invest in all market conditions. SIPs guarantee that the cost of purchase is always in check, irrespective of the market standing.
You can find the right SIP amount through ET Money's SIP Calculator, which gives you an overview of how much your investments would yield if done through this method.