SIP or systematic investment plan is a simple and stress-free mode to invest money in mutual funds. It allows you to invest a certain amount at a regular time interval. SIP helps you to get in the habit of saving money and building wealth for the future. You can have a wealthy future through SIP investment. Here are some reasons how the systematic investment plan helps you grow your money
- Disciplined investing approach
True to its name, the investment in SIP is systematic and disciplined. Every month a certain amount is deducted from your account and is transferred to the selected fund. Thus, if you set the number and amount of installments, you have to simply make sure that your bank account has the sufficient funds.
- No time limitation.
The market fluctuates now and then and it is difficult for an investor to predict the condition of the market. SIP investment is a periodic investment across market cycles. It will surely have the fluctuation effect, but you don’t have to worry about the market movements.
- Advantages of Rupee cost averaging
The systematic investment plan is done across the market cycles. When the market is low, you get more units and when the market is high, you get fewer units. It is useful for the investors as their investment is averaged out and they need not worry about the volatility of the market.
- No guilt in spending
When you invest through SIP to achieve your goals, you can spend your salary the way you want without having any guilt of not saving that money.
- Start early
It’s better to invest early for long-term returns. If you invest RS.1000 monthly for 30 years, then you’ll get RS.30 lakh as its yield. However, if you start investing five years down the line with the same amount, you will get just Rs. 16.8 lakh. Its 45% lower than the SIP investment started five years earlier. Hence, it is advisable to invest early to get more returns.
- Tax benefits
Tax saving in SIP is possible if you go for following SIP schemes.
- ELSS scheme: If you invest in equity-linked saving schemes (ELSS), then it qualifies for tax exemptions under section (U/S) 80C of the Indian income tax act.
- Debt funds: A debt fund may be short-term or long-term. The minimum tenure of the long-term debt fund is three Thus, if you want the tax saving SIP benefits, you need to remain invested for at least three years.
For secured retired life, investing through SIP is a wise decision. One should start early to reap better benefits in the future.