20 Dec 2019 | 3 min read
Investments are very important in today’s world, as mere savings are not enough for a person and the family to survive and enjoy life to the fullest. We being Indians, are prone to savings and we are most comfortable with our earnings and savings in our bank accounts. However, keeping your money safe in a bank account is considered to be underutilization of one’s hard-earned money.
At the same time, recurring monthly expenses abrade the savings with time, leaving no space and scope of investments. For the investment dream that couldn’t work, a new mechanism has been introduced known as the Systematic Investment Plan (SIP). With a SIP, any person can start investing with a comparatively smaller amount and over a longer period of time.
Systematic Investment Plan is a financial vehicle which offers investment opportunities in a mutual fund offering and allows subscribers to invest a small amount of fund over a period of time instead of investing a lumpsum at once.
The main objective of a SIP is to tackle the frequent soar and slide of the market, to keep the investment secure and keep moving towards growth. Some of the advantages of investing through SIP are as follows:
Once a person enters into a SIP to start investing, they are under an obligation to invest only in the mutual fund schemes, and the investments are done in smaller instalments. The funds are managed by professionals, wherein the money is kept safe and in line with the subscriber’s financial interest.
Instead of the regular hearsay that investments must be done with a large sum of money to gain good returns, an investment in SIP can be started with as low as Rs. 500 or Rs. 1000 per month.
The SIP invests the fund across various market cycles, over a period of time. At a time, when the markets are soaring lesser number of units get allotted, when the markets slide a person gets a greater number of units in the same amount and hence the investment is averaged out over months. This helps an investor to beat volatility of the markets and accumulate wealth at the same time.
The power of compounding is known to be one of the most under-rated investment techniques. A compounding interest ensured better long term returns as compared to a lumpsum investment made for the same period. In compounding, the returns along with the investment get re-invested at every monthly cycle and yield larger returns as compared to one-time investment.
As easier as it gets, the financial pundits around the globe have paid a lot of attention and put in efforts to determine a plain and simple rule to efficiently handle your SIPs and the investments related to them.
Start Early + Invest regularly = Wealth Creation
Start Early denotes to the principle of long-term investment, as soon as a person starts investing, more would be the exposure over a period of time which in turn provides compounded returns over the period of investment. Investing regularly increases the corpus of the fund being invested for a longer period of time. With the added are of ‘Rupee cost averaging’ with the formula mentioned above, a person can create wealth many folds over a longer period of time instead of keeping the savings in a bank account.
A person who is financially efficient and smart enough to invest in risk-free instruments knows the value of making your money work hard for you as long as you work hard for your family and the future together. SIP can prove to be beneficial for your long-term goals of providing quality education abroad to your children or ensuring their prosperous future by leaving them a fortune made over a course of time.
We have observed a lot of transition over the last decade about how technology and other aspects have changed the life of human beings, one of which is most critical to mankind, it is making money and putting it to good use so it can work for you and towards your family’s goals. If in case you had any doubts regarding your child’s future goals of studying abroad or starting their own venture post studying, the SIP can be your best bet with minimum risk condition.