What Makes SIP a Smart Financial Instrument for Everyone? | G Plus

Wednesday, 01 April 2020


What Makes SIP a Smart Financial Instrument for Everyone?

G Plus | January 27, 2020 12:37 hrs

Investing a small amount of money regularly is more advantageous than just saving it. That said, building a habit of investing on a regular basis is a challenging task. You never know when a financial emergency will come up to interrupt your investment schedule. It is where SIP investment helps.

A Systematic Investment Plan is a facility that comes with mutual funds schemes to help you invest in a disciplined manner. As per your SIP investment strategy, you choose to put in a fixed amount of money at regular intervals in the mutual fund scheme of your choice. By selecting the SIP route to mutual fund investments, you need not worry much about market conditions. As per facts, the Average Assets Under Management (AAUM) for the month of December 2019 has crossed the bar of 27 Lakh crore rupees. It shows the increasing popularity of mutual funds schemes amongst investors in India.

No matter how much you earn, SIP investment can pave the way for significant returns in the long run along with many other benefits.

  1. Easy to Maintain Investment Discipline

Starting to invest money is easy. You might have invested money previously in some financial instruments butthen stopped doing so, thinking you didn’t get enough returns. Building significant wealth requires patience and investment discipline over a long tenure.

With a SIP investment plan, you follow an optimistic approach to invest a fixed amount of money regularly. The amount you choose to invest gets auto-debited from your bank account, thus minimizing the chance of missing out on the schedule. If you are a salaried individual, you can set the SIP investment date around your salary date.

  1. Start with as low as Rs. 500

Another reason why people fail to build the habit of investing money is a low regular income. They prioritize financial liabilities over investing money in various financial instruments. Although it gives a sense of relief for the short term, they won’t build a significant corpus in the long run.

SIP investment can make things easier for you even if your income seems like a constraint. You can start with as low as Rs. 500 on a monthly, weekly, quarterly or annual basis. Also, you can start planning for the golden years of your retirement withSIP investment to build a large corpus of Rs. 1 crore or even more till you reach that age.


  1. High Returns backed by the Power of Compounding

Consider this example to dig deeper into the power of compounding –

You invest Rs.1000 in a scheme that gives 10% annual returns. After the end of one year, you will have Rs.1100 with you and you choose to reinvest it for another year. Your principal amount will then become Rs.1100 and you earn interest at the same rate for the next year. Continuing to do this can help you build significant wealth over the long term. This is popularly known as the power of compounding.

With a regular SIP investment made for a long tenure, say ten or twenty years, you will get enough returns to fulfill many of your life goals.So, start investing a small amount at an early age than waiting for the right time in life to do so.


  1. Flexibility to Invest More in SIP

Not everyone plans to achieve the same life goals with their investment strategies. You might have started investing money to buy your dream home, while your friend did that to buy his dream car. With SIP investment, you also get the facility to increase the amount you invest annually or at pre-defined intervals. You can choose to add a fixed amount to your SIP or in percentage at regular intervals. Doing this can help you achieve your financial goals earlier or build a bigger corpus with time.

SIP investment is one way to ensure you achieve your life goals the way you want. You should also know that market volatility has an impact on the returns you get with the chosen investment plans. If you need help in investment planning, you can connect with prominent financial advisors, such as FinEdge, to avoid making common mistakes.

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