Everyday Money: 4 Reasons To Invest via SIP
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For retail investors, Systematic Investment Plan or SIP is increasingly becoming synonymous with mutual fund investing in India, and rightly so. SIPs help investors to create wealth over time by investing periodically in mutual funds. The frequency of an investment can be weekly, monthly or quarterly.
The nature of SIPs help ride out market volatility and inculcate savings habits. Here are five reasons why you should start an SIP now.
Ease of Investing
With SIPs you can choose your investment amount, the frequency of investments and even the date when you’d like to invest every month. You just have to sign up with the mutual fund house you want to invest in or an online aggregator, select the amount you’d like to invest and the date. Now several platforms allow video KYC (know your customer), which takes less than five minutes to complete.
You can also pause your SIP for up to six months or even cancel it when required by just intimating the fund. If you are investing through an online platform, you can also skip SIPs in between as and when required.
Invest Small Amounts
“I don’t have money to invest” - this is the most common reason retail investors give for not investing. With SIPs, you don’t need a huge amount to start investing. SIPs lets you invest as little as INR 500 per month. This is almost how much a movie ticket in a multiplex costs.
Set your SIP debit date at the start of the month so that you can invest before you start spending. In a small salary, start with a small SIP so that it easy on your pocket and increase it over time with every appraisal that you get.
Inculcates Investing Discipline
Through an SIP, you invest regularly irrespective of the market movements. Such discipline is crucial to investment success. As your SIP is automated, your investments are placed on time and not interfered with by your greed or fear arising due to market movements.
Average Out Costs
Equity investments are subjected to market volatility. As opposed to lump sum investment, SIPs help to ride out this volatility by investing regularly. When the markets are up, you buy less units at a high price and more units at a cheaper price when the market tanks. This is called rupee cost averaging and it minimises the effect of market fluctuations on your investments.
Related Read: 3 Things To Know Before You Start An SIP