What Is SIP (Systematic Investment Plan) & How SIP Works? Benefits Of Investing In SIP
Do you want to invest in SIPs? Read this complete BQ Prime guide to know its benefits!
Earning money is easy, but multiplying money is a bit difficult. We all wish to retire early, build an empire, own a car and whatnot. In order to complete our desires, we need to think of ways to multiply our savings. And, the easiest way to do that is by investing in SIPs. Even with a little knowledge, anyone can make SIP investments and get higher returns. Let’s discuss this more!
What Is SIP?
A Systematic Investment Plan (SIP) is a disciplined and regular investment approach that allows an individual to invest in a systematic manner. It is an investment manner through which you can invest in mutual funds. You can also set up regular monthly contributions into an existing mutual fund or open a separate account at your bank/credit union where you'll have access to more options.
Also Read: How To Make Rs 1 Crore Via SIPs In Five Years
Investing in mutual funds is a great way to build your wealth. It's also one of the simplest ways to invest, and it takes less time than other methods. However, before you can start investing, there are some things you'll want to know about how SIPs work and why they're so valuable:
How Does SIP Work?
SIP investment is investing a fixed sum of money in a given period. The fixed amount that you invest allows you to purchase a certain number of fund units. If you invest for a long time, you invest during the highs and lows. You don’t require to track the market to make your moves. In a long run, SIP investment mostly provides the best gains.
Suggested Read: How SIPs Can Help You Prepay Housing Loan
Benefits Of Investing In SIP
1. You can start investing with just 500 rupees in most SIPs. - You will be surprised to know that there are many companies which allow you to invest as little as Rs 500 per month or even less than Rs 100 per month. This is definitely a great option for those who want to start their investments with a small amount but want to get a decent return on the money they spend. It is also important to note that all these schemes have been approved by the Sebi (Sebi) regulator of India, so you need not worry about being cheated by any fraudster or scammer who may try to convince you otherwise.
2. Rupee cost averaging: Rupee cost averaging, where you buy more units when prices are low and less when they're high. It helps average out your purchasing costs over the tenure of the investment period. You simply don’t need to time the market.
3. Flexible investment: SIPs are open-ended investment funds, and it allows you to make withdrawals whenever you feel like it. There is no fixed tenure or fixed amount for SIP investment. Also, according to your income, your amount can be increased or decreased over time.
4. Power of compounding: SIP operates on the principle of receiving compound interest. To put it simply, an investment for a long time provides better results than a one-time investment.
5. Acts as an Emergency fund: As SIP is an open-ended investment, you can withdraw funds anytime you need. So, if you face any financial crisis, your SIP investment will come to rescue you.
Conclusion
A SIP is an ideal way to get started with mutual funds. It's a disciplined and regular investment approach that allows an individual to invest in a systematic manner. You can start investing with just 500 rupees in most SIPs, which means you don't need a lot of capital or time to start investing.