Do SIP in mutual fund, This is what most of you hear when you ask about investment from someone.
But what does SIP in mutual fund means?
You must have seen that advertisement of Royal Stag where SRK comes and says, “bada banta hai small se, small military ja aur large banatey ja”. This can be a great way of seeing SIP in mutual funds.
Investors in mutual funds have the choice of making a one-time lump sum investment or even starting a monthly SIP. Investors that invest all at once typically expose their entire investment to the market’s volatility. However, practically everyone may now invest in mutual funds and give themselves a chance of long-term financial appreciation thanks to the invention of the Systematic Investment Plan, or SIP.
I highly recommend you to read How to Invest in Mutual Fund? , How it works and Types of Mutual Funds.
Let’s look why you should do SIP in mutual fund and also know more about SIP.
What is SIP in Mutual Fund?
You can invest in mutual funds by doing SIP in mutual fund, which is a type of investment strategy. As the name suggests, it is a methodical way to invest certain sums of money on a regular basis. This may occur every month, every quarter, every two years, etc. Investing steadily in this way can make it simpler to achieve your financial objectives.
How does SIP work in Mutual Fund?
You can invest in mutual funds by doing SIP in mutual fund, which is a type of investment strategy. As the name suggests, it is a methodical way to invest certain sums of money on a regular basis. This may occur every month, every quarter, every two years, etc. Investing steadily in this way can make it simpler to achieve your financial objectives.
When you make an investment through a SIP, you do it over a certain amount of time. You are able to buy a specific number of fund units with this money. If you keep doing this over an extended period of time, you’ll be able to invest in the fund both during the highs and lows. In other words, you can make investments without having to time the market. Investing at the wrong moment can happen if one tries to time the market. SIP investments eliminate this element of uncertainty.
Benefits of doing SIP in Mutual Fund
Discipline
The majority of investors struggle to continue investing for an extended period of time after they begin. SIPs by their very nature increase your investment journey’s discipline. You don’t need to make the monthly contributions yourself because a predetermined amount you specify automatically invests in the plan of your choice.
Small Amounts of SIP in mutual fund
You can start investing with SIP in mutual fund for as little as INR 500 each month. You can still benefit from or participate in the expansion of the Indian stock market even if your earnings or savings are modest by choosing to invest in SIP plans in a variety of mutual funds.
Compounding
When the returns on the investments you made start earning returns, compounding takes place. Although it is a straightforward idea, there are many practical implications. Your returns can be reinvested when you make recurring investments through SIP in mutual fund.. The potential profits multiply as time goes on due to a snowball effect that emerges from this. Investing for a long time is the best strategy for maximising the reward. This is another advantage of SIP, where you gain from investing as soon as feasible.
Stop or Skip SIP in mutual fund
You could occasionally not have enough money in your bank account to make SIP investments for a variety of reasons. Not to worry. You can skip a month using SIPs without incurring any fees or penalties. Unlike an RD or an FD, you can return later and continue investing as you did each month.
Reduces the Average Cost of Mutual Fund Units
SIPs assist in lowering the average cost at which you purchase mutual fund units, building on the argument made above. When the markets are performing better than expected, the fund’s NAV (Net Asset Value) rises. Therefore, over time, when you consistently invest a fixed amount through SIP, the average cost of buying the units tends to be cheaper than when you make a lump sum investment during a bull market.
No room for Emotional Investing
It might be difficult for an investor to avoid being affected by the market’s ups and downs. Due to market volatility, consumers frequently make irrational financial decisions that frequently fall short of expectations. SIPs, on the other hand, shield investors from making the same emotional errors that fund managers do while managing investments.
Complete Transparency
The AMFI and SEBI have put in place a number of strict regulations that every mutual fund scheme and AMC must adhere to in order to protect the interests of investors. Due to this, the mutual fund sector has become transparent and secure for individuals who are just beginning their financial adventure.
Online Tracking
Investors can now manage their mutual fund investments online with the majority of big AMCs in India. You will be given a user ID and password once a SIP has begun so that you can access your account from any location at any time. From the comfort of your home, you may follow your SIP, change to a different plan, stop your SIP, start a new SIP, and even redeem your units.
Conclusion
You have learned what you will get by investing with the help of SIP in mutual fund. Now It time to invest in the real money market and grow the wealth.
Mutual Funds are in market and market reflects the economy experiences, by doing SIP in mutual fund you will protected from volatility of the market. These small SIP in mutual fund will work in your favour. Once you master the volaitliy of the market you will understand more about the movements of market.
I hope you enjoyed this guide on SIP in mutual fund and added same value to your knowledge.
I like SIP because it is not impacted by volatility.
Why do you like SIP do let me know in the comment section.
Till Then
Happy Learning! Happy Investing!