Systematic Investment Plans or SIPs are fast gaining momentum in India especially among retail and salaried people. Monthly SIP flow into the market is presently above Rs 7500. One of the main reasons why many investors are choosing SIP is that it helps them invest in a disciplined manner without worrying about market volatility and timing because of rupee cost averaging. So if you haven’t yet taken the advantage of this wealth creation tool, get on it now!
SIPs are investment plans offered by Mutual Funds wherein you can invest a set amount in a mutual fund scheme periodically at fixed intervals. It is a very convenient method of investing in mutual funds through standing instructions to debit your bank account every month. The average SIP size in India is presently ~INR 3,250, so it’s not too heavy on the pocket either. You can also opt for investments in multiple SIPs and schemes or consider an annual increase in the SIP amount, depending on your end goal. To give you an example – say you initiate an SIP of INR 5,000 in a well-diversified scheme, with an annual increase of 5 per cent for the next 15 years; you will be able to achieve your goal of buying a house or a fancy car worth ~INR 30 lakh at an assumed annual return of 14 per cent per annum on your investments. This is the magic of compounding.
SIPs done systematically provide investors the benefit of rupee cost averaging, a term that was introduced in the opening. This essentially means that since investment is done regularly, the investor gets more units when the prices are down, thereby reducing the average cost. Therefore, market corrections should not always be perceived as bad scenarios if you are an SIP holder with a long term investment horizon.
We have multiple goals that vary at different stages of life like owning a house, going on a dream vacation, providing children the world class education and a grand wedding, having a financially sound retirement for ourselves and so forth. In order to have it all, and which is possible, it’s important that you have a financial plan. SIPs are considered as an ideal investment for new and experienced investors as they provide bundled benefits of risk diversification, compounded income, value of investment and convenient cash to capital conversion. All these are possible with the right choice of SIP and that depends on smart advice, painstaking research and in-depth knowledge of the markets and that’s where experts like Geojit’s Funds Genie step in to help you fulfill your goals effortlessly.
Posted: September 2018