Investing in mutual funds has become a popular option among investors due to the ease of investing, good returns and investment diversification and SIPs are a convenient way to invest in Mutual Funds. SIP is the preferred instrument for retirement planning, wealth management and investment management. Why is SIP the most convenient way to invest? Let’s list down the reasons –

Disciplined investments –

Investments in SIPs are made at regular, predefined intervals in the mutual funds of your choice automatically. Since the investment is automatic, it will get converted to savings before you spend anything. This creates discipline in your saving habits which you can realise later when the need arises. It’s a popular reason for investment towards retirement planning, wealth management, wealth management and financial growth.

Invest with a small amount –

The advantage of SIP is that you can start as low as ₹500 per month. It isn’t necessary that you have to invest a large sum to see a high return. Depending on how much your income is and what you can set aside each month for savings, you can start your SIP. You don’t have to be earning big bucks to invest in mutual funds.

Top-Up your SIP –

You can also increase your SIP amount by a fixed amount or percentage at a certain time that can coincide with your bonus and annual income raise. The top-up allows you to align with inflation and your life goals and help you reach them sooner or create a corpus to meet your goals.

Power of Compounding –

Investing regularly for the long term will magnify your benefits by compounding the effect. The power of compounding is such that you will reap benefits not only for your principal but also for the returns earned on the principal which is reinvested in the market. This way your money is earning money for you.

Timing the Market –

With SIP, you don’t have to worry about the fluctuation of the market. With SIP, for the same amount, you will purchase more mutual fund units if the market is low or less if the market is high. Since you will be investing every month, this fluctuation of the market will be averaged and you will find that your investments will have a find balance. Hence, you don’t have to worry about the volatility of the market with SIP.

Stop at any time –

The advantage of SIP is that you can stop the SIP any time you want. Most of the SIPs do not charge any penalty for discontinuing the investment and this can be done easily by stopping the SIP investment from your Demat Account. Traditional investments like Fixed Deposit (FD) or Recurring Deposits (RD) do not offer this benefit.

Pause or skip –

You can even pause your SIP for a few months if you want to divert your funds elsewhere or you are tight on funds. There is no penalty for the pause and you can continue again from the next month or after that, this facility isn’t available with FD or RD investments.

Multiple SIPs –

Apart from the Top-up, you can have multiple SIPs running at the same time if you get additional funds or an increment at work. This gives you the option to diversify your investment and get greater returns.

Tax benefits –

Certain funds have a tax benefit under Section 80C of the Income Tax Act which is a bonus. Hence investing regularly in SIP will give you the benefit of savings with great returns and tax benefits.

Start Early –

Start your investments as soon as you start earning, which allows you to accumulate great wealth in a short period and you can reap the benefits of compounding. The same amount that you start investing at say 25 years of age and plan to retire at 50 years will give you a greater return when compared to starting at 30 years.

With these benefits, SIP makes for an attractive investment option which can streamline

Your investment goal achievement

Set a discipline for savings since it is a time-bound investment,

Protects you from market volatility and

Earns great returns with the magic of compounding.

A highly recommended investment tool by financial planners for anyone attempting financial planning and traversing the road to financial success.