A SIP (Systematic Investment Plan) is a smart financial planning tool that could help you create wealth by investing small sums of money regularly, over a period of time.
Benefits of a SIP
Disciplined investment approach
Investing regularly helps avoid sentiment-driven investments such as investing larger sums in bull markets (when the markets are at a high) and smaller sums in bear markets (when markets are at a low). Moreover, through regular investing, you don’t have to wait for the right time to invest, which could be a time-consuming and risky task.
Rupee cost averaging
Through systematic investing, you could buy more units when the prices are low and fewer units when the prices are high. This results in averaging of the cost per unit.
Helps you reach your financial goal
SIP could be the right tool for those who have a specific, future financial requirement. By investing an amount of your choice at regular intervals, you could plan for and meet financial goals, such as a child’s education, a marriage in the family or a comfortable life after retirement.
Lighter on the wallet
Saving regularly is easy as you treat your investment as part of your monthly budget. As investments through a SIP can be as low as `500 per month for equity schemes and 1,000 per month for debt schemes, a SIP does not come with any burden of saving heavily every month.
Categories: Personal Finance