SIP always features in any good investor education programme in India. It is a small amount of money invested regularly for a long time. Some people hesitate with plans like the PPF or other insurance policies for the sake of elongated commitments. In such instances, SIPs are the best solution. The financial goals are met with investing only a small amount of money every month, and over time it grows to meet your financial needs.
An ideal investor education session would recommend SIP to be a smart wealth building measure. You can start investing with a minimum amount per month and reap its rich benefits. Let us have a look at the advantages a SIP offers:
- Disciplined investment: Investments in SIP are systematic and disciplined. A small amount every month goes towards the investments, instead of a large amount annually. All your worries of what amount and when to invest, are put to rest with SIP.
- Rupee cost averaging: This is one major reason why investors choose SIP. The SIP investor need not take the stress of market volatility. Since the invested amount is fixed, you buy more units when the market price is low and lesser units when the market price is high. Thus the investment is balanced out.
- Compounding power: Like they say, ‘Every drop makes an ocean’, a minimal amount invested each month can potentially grow big one day. If you start early investment and do it over a long period of time, you can take advantage of the power of compounding. As an example, a SIP of Rs. 2000 for 20 years, will earn you Rs. 20 lakh eventually.
- Very convenient to follow: A SIP is easy to implement. A duly filled application form or a simple instruction to your bank giving your nod for auto debit of the invested amount each month, will take care of the formalities. You can sit back and relax without much worry thinking if the investment has been done or not. The investment can also be followed through regular account statements.
- More benefits: You can realize your financial needs with SIP. If you are eyeing to buy a car in the next 5 years or so, investing through SIP would be the most beneficial option. It requires a small amount every month, without becoming a burden for you.
The money for investing in SIP is deducted from your salary at the beginning of every month. When you are free from any investment responsibilities, the remaining part of the salary can be spent as per your wish.
A SIP can be started with as low as Rs. 500. Thus investors from any financial background are able to make this commitment to own a better future.
Many funding houses let go of entry and exit loads on MFs (mutual funds) if the investment is made through SIP.
So, the secret of a successful SIP is to plan a long-term investment to get fruitful results. Investor education is helpful in this regard. Awareness should be spread among the investors about their investment choices and the existing opportunities.