Over the years, we have been hearing about the stories of people turning out to be the billionaires overnight, but is it really so? Who doesn’t want to be? Even I want to be one. Well! But the fact is that tycoons like Warren Buffett, have actually built their own empires with investments on buying right and sitting tight.
Having said that; let me ask you, what are your financial goals and what are you doing to achieve them? You keep a hold of a secured job with good salary package, commercial independence, but still more is needed. Sure! You must be doing savings on the earnings. So, what do you do more to grow the assets? If you have ever thought over investments, you must have surely heard about investing in SIP, i.e., Systematic Investment Plan.
“What is SIP?” It’s is the simplest, organised and a convenient way to fulfil your dreams.
The core behind this is that you invest a fixed amount every month or quarterly over a period of time in the mutual funds. However, the NAV (Net Asset Value) of the fund might vary each month; whereas, on the other hand, you can also increase with the committed amount along with the rise in your source of income to avail more benefits of when you invest in SIP.
Is your mind wondering whirls of questions about investing in SIP? Hold your thoughts! Here are the facts that will give you clear idea about it. Let’s have a look at that:
- Easy investment
“But I don’t know about mutual funds, so what do I do now?” you had this question in your mind. Didn’t you? Relax! If you are amongst those who cannot give full time attention to the stock market or the early investors who just have a vague knowledge about the finance and budgeting, you can undoubtedly invest in SIP. It is reliable. SIP doesn’t ask necessarily for big-time investment, you can start with a fairly small amount too.
- Better returns
Turning back the pages of market, when we look into the past decade, the average inflation rate has been about 7% p.a. and a couple of years back; which has gradually paced down. If we consider the capital market return, a person who is willing to invest in SIP can have CAGR (Compounded Annual Growth Rate) of around 15% p.a. in the long term i.e 5 years or more. It clearly shows that comparative to the other options to put the money in, investing in SIP has beaten the other asset classes. This is a good value for money.
- Investment in small chunks
Investing in lump sum is not what everyone can afford to do so. Also, when you are not sure about the market, where you never know if the market is running at its peak or trough. Thereby, when you invest in SIP, it turns out to be a life saver for you. As you cannot do large investment, devoting in small chunks overtime leads to good monetary benefits in long run. Of-course, it feels a bit stress free when you know that you will not lose the valuable amount if the market goes down.
- Don’t worry about the market
Even if you invest the regular amount that you had committed for the investment when the market is low, you are not adversely affected by it. Instead, many of the sources suggest doing more here – yes, invest in SIP. With this investment, you can also benefit from rupee-cost averaging. No worries about the inflation in market as the average investment shall balance out with the funds.
- Long term savings
If you have the habit of savings, and you invest in SIP, it will ultimately lead to good long term returns. It is like when you take a decision to make yourself fit and fabulous, you start the daily work out because you trust that you will undoubtedly see the good results in some time. Similarly, you shall definitely experience the power of compounding when you regularly invest over a period of time.
- Tax Benefits
Just like there are tax saving government securities, FDs, there are also tax saver mutual funds to cut down your tax bill, one of which is ELSS SIP’, i.e., Equity Linked Saving Scheme. However, the according to section 80C, the maximum limit of investment is up to Rs. 1.5 lakhs.
- Achieve your financial goals
We are living in a generation where our needs are increasing day by day. And to fulfil those, savings in bank will just not do. On the contrary, if you invest in SIP starting with a small amount, you take the advantage of the investment along with the dividends and capital gains too. Isn’t it a win-win situation for your short-term and long-term goals!
- Minimize risks
It is because you regularly supply a deliberate amount over a period time, the gross investment is averaged. And hence, reduces the risk factor of being unfavorable by the fluctuations happening in the market. If you still aren’t sure about long-term financial goals, do talk to your financial advisor about a proper plan. When you invest in SIP, it acts as a stepping stone for to reach your goals.
The below quotation of Warren Buffet fits rightly, when you have made a decision to invest in SIP.
“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
Indeed, I am investing in SIP. What about you?