Mutual Fund SIP is one of the most talked-about investment options these days with ads around mutual funds sips sprawling everywhere in print as well as electronic media. From cricket players to popular actors/actresses, everyone is seen promoting the mutual fund’s sip plans. Every committed adviser or planner too would rate these mutual fund sips on top of their recommendation radar.
A topic too widely discussed for years now, mutual fund sip investment still has not lost its sheen. This is primarily because of the many benefits that the mutual fund sip has as an investment avenue. We hereby detail out some of these positives of having a mutual fund sip.
Mutual Funds SIP is the ideal investment for wealth creation just as it is ideal for goal funding, it is well suited for beginners as well as seasoned investors. When it comes to market-linked investments, market vagaries only add to the points favoring mutual fund sips.
What is a mutual fund SIP like?
Mutual fund SIP is a systematic investment plan in mutual funds wherein you invest a predetermined amount in your chosen mutual fund or funds at a predefined time interval which may range from daily, weekly, fortnightly to monthly and quarterly too. Ideally speaking, the sip is a preferred mode of investment in market-linked investments such as equities and benefits the investor by averaging the cost of purchase as the SIP is getting executed at different market levels that are anyways unpredictable.
Advantages of SIP
Apart from the averaging of cost of purchase of the mutual fund units, the mutual fund sip plans also have other benefits that are listed as below –
- Easy to start your investment journey
- Comfortable on cash flows -
- Power of compounding
- Disciplined Savings & Investment –
- Online Facility
One can start a monthly SIP with as low an amount as Rs.500. Your gain experience of investing in capital markets with as low a denomination as this which is wonderful.
Depending on what one finds comfortable, a monthly SIP can be initiated as a percentage of one’s discretionary cash flow available. One need not stress about investing in a big sum but make a start as suited to one’s own cash flow situation without any fret or fear.
Maybe, one is saving small but is surely growing big and that’s one of the biggest advantages of mutual fund sips. As your mutual fund sip plan investment continues and you do not make any withdrawals, your invested amount continues to grow. As the price or nav of a mutual fund unit goes up, the value of all units as held by you is appreciated and this is how you continue making returns on returns through appreciation of your consolidated unit holding. The opposite would happen if the market was to fall down and the NAVs were to fall but even in that scenario, your fixed investment amount is buying you more units, the value of which will appreciate as the market changes from negative to positive. On both ends of the fulcrum, a mutual fund investor continues to benefit.
The mutual fund sip plan investments are committed investments and add to one’s financial discipline too.
Just a few clicks and one can create a mutual fund sip online. It couldn’t be more convenient than this. Most financial services providers have online platforms where an investor can even invest in a group of chosen funds by creating a model portfolio for oneself and this whole process can be completed in a couple of minutes. The online mode of investing in mutual fund sips has made it a cakewalk. Not only this, one can review the sip performance, increase the sip amount or reduce it or stop the sip or even increase the sip and also redeem the sip investment in a matter of a few clicks.
Conclusion
Mutual fund SIPs are an evergreen investment avenue that every individual must understand, analyze, and implement. Of course, the choice of funds while starting a sip is very important and so is a regular review of the sip performance. If one is not able to find time for the necessary research for choosing the best funds or for reviewing their fund sips on a periodic basis, it is best to refer to professional help so that one does not flaw in the overall process of investing. Every investor has their own set of needs and temperament too. While mutual fund sips are a case of one size fits all on a broader level, the choice of funds or the overall model portfolio has to be customized to one’s needs and temperaments.
People often ask
- Is it the best time to invest in SIP?
- How much should I invest in SIP monthly?
- Can I miss an SIP payment?
- Is SIP mutual funds safe?
- Can I increase SIP duration?
Any time is the best time to invest in SIP and this is the USP of SIP. One does not have to time it.
One can start a SIP with just INR 500 and there is no upper limit as such. The investor can decide it based on their cash flow situation.
Yes, one can miss the SIP payment and the SIP stops only when at least three consecutive instalments are missed.
SIP in mutual funds is one of the safest and most qualified avenues to invest in.
Yes, you can increase the sip duration.