By 
Several individuals have this notion that investing is as good as letting their money sit idle in their bank accounts. They couldn’t be more wrong. While bank savings accounts do offer interests to individuals, however the returns on this investment option does not have the capacity to beat inflation. So, an investor must put their money in a place where it can grow over time and beat inflation. One such investment option is investing in mutual funds. If you are a salaried individual, might want to enjoy the benefits of mutual funds through SIP mode of investment. If you are unsure about this investment tool, this article serves as an SIP mutual fund investment guide.
What is SIP?
Systematic Investment Plan are a route to invest in mutual funds – it must not be confused as an investment avenue. So, if SIP is just a way to invest in mutual funds, you may wonder what’s the specialty of SIP investments. Well, SIPs allow you to divide your investment amount into small, insignificant investment amounts which are invested on a regular basis for a defined period of time. Under SIP investment, a fixed amount is deducted from the bank account of the investor on a fixed date at regular intervals for a fixed duration. The regularity of the intervals can be daily, weekly, monthly, semi-annually, quarterly, or annually. The most common periodicity is monthly installments.
Why should salaried investors consider SIP mode of investment?
SIPs are an amazing way to trump market volatility and also makes an investor immune to market timings to some extent. Let’s understand why investing in mutual funds via SIP is ideal for salaried investors:
- Disciplined investing
As SIPs ensure regular investing in mutual funds on a periodic basis, it inculcates a sense of investment discipline among investors which is important to achieve one’s financial goals. - Rupee cost averaging
Equity markets are known for their volatilities. However, it is this volatility that allows investors to earn significant returns on their investments. Due to regular investing through SIPs, an investor ends up investing across varying market cycles. As a result, one ends up accumulating more mutual fund units when the markets are low than when the markets are at its peak and vice versa. This investment method is known as rupee cost averaging - No need to time the markets
SIPs negates the purpose of timing the markets. With regular investing, you enjoy the benefits of rupee cost averaging which reduces the risk of timing the markets. Instead of timing the markets, SIP investments believe in the concept of time in the markets – i.e. staying invested for a prolonged duration can help you earn significant returns rather than attempting to time the markets. - Power of compounding
SIPs also allow investors to enjoy the benefits of compounding. The power of compounding is paramount as it allows investors to earn significant returns by re-investing the returns earned on investments to earn further investments. The power of compounding is directly proportional to the time you stay invested in the markets. - Low minimum investment amount
You can invest in SIP mutual fund an amount as low as Rs 100 per month. This means that individuals who earn daily wages or financially backward people can also invest in mutual funds with the help of SIP investment.
