Let’s say you’re given a choice to save or invest at the end of the month. Would you do it every month without fail, year after year? Probably. However, human nature is such that spending brings more gratification than consciously saving or investing. But what if you had an automated option that takes away the manual effort of investing on your behalf? Welcome to the world of Systematic Investment Plans [SIPs].
Regarded as one of the most fundamentally essential tools to help achieve long-term financial goals, SIPs or systematic investing hold a good deal of power in transforming your economic life for the better. It is simply a process of contributing a fixed amount of income into a mutual fund scheme or portfolio of your choice at a predetermined level.
This compelling yet straightforward systematic method combines the power of compounding interest to achieve your long-term goals. When your SIP investments begin to earn interest on interest as well as on the principal, it is known as the power or magic of compounding.
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In addition, investing through SIP also provides you with the benefit of rupee cost averaging that allows you to navigate the market volatility and average out the risks over the long run. So, for instance, when the market is at a low, your SIP can get you more units. Similarly, when the market is at a high, the SIP will get you fewer units. However, rupee cost averaging is beneficial in the long run because of the overall decrease in the price per fund unit.
So, even if you have next to nothing, starting a SIP can potentially help you achieve whatever lifetime financial goals you can imagine. Let’s understand the many benefits of creating a SIP.
Understanding the Concept of SIP
Investing through SIP gives you an investment edge in outperforming the market while adhering to passive investing principles. It relies on a system to achieve better-than-average returns without involving forecasting. Additional features include:
- You can achieve long-term wealth in the equity market with discipline.
- It offers you a disciplined and straightforward method to investing for a long-term time horizon.
- It makes it possible for you to invest small amounts of money over the long. run to accumulate wealth.
- It works on the concept of rupee cost averaging.
- It offers you flexibility with regards to amount-based or quantity-based SIP.
- It provides flexibility in investing intervals such as fortnightly, monthly, or quarterly.
Benefits of a Systematic Investment Plan
A SIP can be an ideal option for a new investor or one who does not have enough time and resources to research the market. It helps you to:
- Cut down the risk due to rupee cost averaging.
- Does away with the concept of timing the market.
- Align your long-term financial goals.
- Provides you with a disciplined approach to controlling your emotions when investing.
Conclusion
SIPs can be a reliable tool in your wealth-creation arsenal that can allow you to gather a significant amount over the long run. It helps average out the risk in the long run and enables you to build a large corpus through the power of compounding.
When choosing the right mutual funds to achieve your investment goals, ICICI Direct provides you access to award-winning mutual fund baskets handpicked by critically awarded research teams. ICICI Direct Money App also makes it effortless for you to invest in mutual fund SIPs with just a few swipes or clicks on your smartphone. So if you’ve never invested through a systematic investment plan, start today with ICICI Direct.
Disclaimer – ICICI Securities Ltd. ( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. – ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai – 400 025, India, Tel No : 022 – 6807 7100. AMFI Regn. No.: ARN-0845. We are distributors for Mutual funds. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully. Please note, Mutual Fund related services are not Exchange traded products and I-Sec is just acting as distributor to solicit these products. All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon.
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