Although it might seem that investing in mutual funds is a risky job, you can mitigate the uncertainties through diversification, proper asset allocation, and others. Generally, mutual fund investment can be either made through lump-sum, one-time investment, or directly using SIP.
The latter choice, SIP, is slowly becoming a popular choice among investors as it makes investing cost-effective. To understand it in detail, you can use the SIP calculator available on many bank’s websites. It will help you determine the returns you can avail.
Find below many reasons that state the importance of investing through SIP:
- 1 Reason 1: Stop SIP at Any Time You Want
- 2 Reason 2: Skipping SIP Payment is Allowed
- 3 Reason 3: Start a New SIP
- 4 Reason 4: Ensure Discipline with Your Saving
- 5 Reason 5: Effect of Compounding
- 6 Reason 6: Small Amount of Investments
- 7 Reason 7: You Do Not Have to Worry About the Market
- 8 Reason 8: Past Performance Gives a Clear Idea
Reason 1: Stop SIP at Any Time You Want
One reason for investing through SIP is that you have the flexibility to stop anytime. You do not have to face any fine or penalty. Plus, there is no lock-in period. When you visit the bank’s websites to use the SIP calculator, you will find the basic information about investing through SIP.
After deactivating your account, you can refund the previous amount or even continue to stay invested. In general, SIP’s are extremely useful when there is an emergency. You can easily redeem the amount at your convenience.
Reason 2: Skipping SIP Payment is Allowed
Usually, sometimes when you may have a low balance in the bank and cannot pay for SIP, you can skip the payment. The banks may not charge any fine. Nevertheless, it is advisable that you do not miss out on any payments.
Reason 3: Start a New SIP
The best aspect is that there are no regulations on the number of SIP’s you hold. In case you can save more, you have the flexibility to open another SIP. You can use the SIP calculator to evaluate your funds and then start a new SIP.
It will help you earn good returns from both accounts. Opening a new SIP is entirely as per your individual needs. However, you need to track both your funds to avoid loss of income.
Reason 4: Ensure Discipline with Your Saving
The use of a SIP calculator is essential before you apply for SIP. It will help you plan and build discipline with regular saving habits. Plus, an automated deduction of the SIP amount also keeps you stress-free as you do not have to invest each month manually. You can also choose to pay for SIP weekly or annually after using the SIP calculator and understanding your requirement.
Reason 5: Effect of Compounding
SIP gives you the benefit of the power of compounding. It includes rupee cost averaging, ensuring that you derive better returns from SIP as against the lump-sum amount. You will purchase more units when the market is in a slump and fewer units when the market is booming. And as a result, you will experience a decrease in the unit’s cost in the long run.
Reason 6: Small Amount of Investments
Generally, the SIP strategy lets you start an investment of Rs 500 per month. Even if you choose an equity mutual fund, the payment method makes it possible to invest affordably. So, once your income increases, you can gradually raise the SIP amount after using the SIP calculator.
Reason 7: You Do Not Have to Worry About the Market
The best aspect of investing through SIP is that you do not need to time the market. Since the rupee cost averaging comes into play, you will be unaffected by the market booming fluctuations.
Reason 8: Past Performance Gives a Clear Idea
There are many SIP investment plans offered in our country. And to choose any, it will help if you analyzed the mutual fund’s past performance. With this knowledge, you can reap great benefits. Plus, it will be beneficial to consider your risks and goals before investing and the past performance of the fund.
If you are just starting your investment journey, then investing through SIP can be your stepping stone. There are other investment options like PPF as well. However, they are generally a long term investment plan. You can use the PPF calculator to evaluate your needs. Butif you opt for SIP, make sure to opt for reputable banks like Axis Bank. You can visit their website and explore their plans in detail.
Start investing today for a better future!