Systematic Investment Plans - Investing in Mutual Funds

A SIP or Systematic Investment Plan is a popular mode of investing in Mutual Funds. As the name implies, a systematic investment plan allows investors to set up a systematic method of investing where they get to invest in regular intervals every so often – could be monthly, quarterly or semi-annually, etc. – instead of putting in a lump-sum amount at a time. SIPs allow customers more freedom to set the terms of the amount they want to invest and fix a pre-defined interval of investment.

Mutual funds are designed for ease of use, allowing investors to own a diverse range of assets. And SIP is a disciplined approach to investing. Investors get to start with an amount that lets them purchase a certain amount of equity fund units which accumulate as the investment period lengthens. 

 

Market Timing

Mutual funds are subject to market risks, and it is critical to time your investments precisely to reap the benefits. SIPs eliminate this risk by allowing you to invest in both market highs and lows. There is no need to time the market, simply devise a SIP plan that works for you, and you are set for the remainder of your investment period.

 

Compounding

Compounding occurs when your current investment returns begin to earn returns of their own. In layman's terms, because SIP is a long-term wealth-creation tool, you can begin by investing small amounts, and as the returns on these investments begin to accumulate, they get reinvested until the maturity of your plan.

 

Return on Investment

SIP plans have been shown to provide higher returns than traditional investment options such as FDs and PPFs. The only trick is deciding which plan to invest in.

 

Risk Level

SIP is a low-cost way to invest each month without taking any risks. You can begin with small amounts and work your way up. Furthermore, because you are investing small amounts, the risk of losing large sums is eliminated.

SIP investments are a great way to start your investment in mutual funds. However, before investing, it is important to do some research and learn more about mutual funds and the risks involved.