4 Reasons to start an SIP today

SIP means Systematic Investment Plan, which is a method of investing in mutual funds. Alternative to one-time lump sum investments, SIPs allow investors to set aside a certain amount of money each month and invest the same into a mutual fund scheme.

Every SIP instalment paid increases the value of the overall investment.

The mutual fund scheme, SIP amount, and the frequency of payments have to be decided in advance - and investments have to be made periodically (say, once a month).

Here are 4 reasons to invest that extra Rs.5,000 you save at the end of the month:

  1. Easiest way to build real wealth: Rs.5,000 a month may not seem like a big amount right now, but when invested regularly for, say, 10 years, a capital of Rs.6,00,000 would have been invested. This could earn so much more than if it stayed in your bank. Note that with a conservative returns projection of 8%, you would have earned a total of Rs.9,20,828. Here’s a table that illustrates what you stand to gain in various scenarios:        

SIP Duration (in years)

Invested Amount

Returns

 

 

8%

12%*

15%

3

Rs.1,80,000

Rs.2,04,029

Rs.2,17,538

Rs.2,28,397

5

Rs.3,00,000

Rs.3,69,834

Rs.4,12,432

Rs.4,48,408

7

Rs.4,20,000

Rs.5,64,304

Rs.6,59,895

Rs.7,44,841

10

Rs.6,00,000

Rs.9,20,828

Rs.11,61,695

Rs.13,93,286

*assumed rate for equity mutual funds

Look at that growth over time, and all with just Rs.5,000 a month – a massive difference between what you’ve invested and what you could earn.

2. A disciplined way to invest: SIP means that you don’t have to remember to invest every month - the investments happen automagically for you! This means that without doing anything, every month a sum of money gets invested in your name from your bank account. Both the bank debit and the investment happens without any intervention from you. What does that mean? Less hassle for you as you go about building wealth every month!

3. Rupee-Cost Averaging: Mutual funds are purchased in the form of units in exchange for money. The price for units depends on how well the fund is doing. If the fund is doing well, the unit cost increases, if the fund isn’t doing well, the unit cost drops. Thus, investing regularly averages out these price differences for maximum benefit.

4. Flexibility: You decide how your SIPs are run. You get the freedom to choose the investment amount, date, duration, and frequency. in advance. You can also choose to have flexi-SIPs (where you decide the investment amount) or, Step-up SIPs (where your investment amount is increased periodically).

You can browse through and invest in the best SIP plans of 2018 online through FundsIndia and benefit with custom recommendations from our award-winning advisory services.