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Decoding Systematic Investment Plan for effective financial journey

Mutual Fund Investments are subject to market risks, read all scheme related documents carefully

February 25, 2021 / 07:35 PM IST

One of the myths around investment planning is- it is for the rich and you can only invest after saving a significant amount in your bank account. Wrong. It is about taking meaningful steps to achieve your desired goals with the money you have in hand.

For this, you don’t have to save a hefty amount to begin your investment journey. You can start with just Rs 500 as well. If you are assessing different investment tools, or just dipping your feet into investment journey, you can look at mutual funds.

Mutual funds can be a smart way to begin your investment journey and build wealth over time. The advantage of mutual funds is you don’t have to invest a large amount in one go. Instead, you can take the Systematic Investment Plan (SIP) route.

Understanding SIP

SIP enables you to invest a fixed amount at regular intervals-monthly, quarterly or half-yearly- in your preferred mutual funds. It gives you the flexibility of building a corpus over a period of time, without investing an upfront amount. When you choose a SIP for your mutual fund, the amount decided by you gets auto-debited from your bank account in the time interval chosen by you.

Investment required

 One of the benefits of investing through SIPs is you can start with as low as Rs 500. For instance, you can begin your investment journey with Axis Mutual Fund through SIP. On their website, you can scan through different mutual fund schemes and start an SIP to achieve your financial goals. You can even calculate how much SIP amount you would need to reach the milestone.

Benefits of SIP

There are several benefits attached with SIP route

  1. Power of compounding: Staying invested for a long period of time helps in earning greater returns. Over time, your earnings are subjected to compounding.

  2. Invest in multiple funds: Since you can begin SIPs with a low amount, you can invest in different funds that suit your goal and risk appetite, and take advantage of maximum growth.

  3. Market volatility: With SIP in mutual funds, you don’t have to worry about market fluctuations. If your risk appetite is low, you can look at investing in mutual funds via SIP to grow money.

  4. Financial discipline: Creating wealth requires patience and discipline. With the auto-debit option, the SIP route makes you a disciplined investor and takes away the trouble of allocating monies every month, manually.

  5. Rupee cost averaging: When you invest via SIP, you can buy more units with the same amount when the market is low and vice-versa. Thus, you don’t have to worry about market volatility.

  6. Encourages saving behaviour: Since a fixed amount gets auto-debited from the bank account periodically, it helps you develop the habit of saving, which helps individuals achieve higher goals in the long run.

 With periodic investments in mutual funds via SIP, you can plan and earn better.

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first published: Feb 25, 2021 05:43 pm
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