Most people tend to have a secure job with a good income, but still, there’s more to be done for your finances.Majority of the billionaires you know, from Warren Buffett to Ben Graham, built their wealth through market investments. So, in addition to earning a good income, you must ensure to invest your surplus income to generate wealth. Here’s where you must think of opting for aSystematic Investment Plan (SIP) mutual fund investment.
What’s an SIP investment? It is one of the most organised, simple, and convenient methods of meeting your financial goal. The concept here is to invest a predetermined amount at a predetermined time, say monthly, quarterly, six-monthly, etc., over a period in a mutual fund of your choice. If you think you know fairly well about SIPs, here are some facts you can run over to confirm that.
Easy to invest
If you are one of those who do not have sufficient time to assess the stock market or are a new investor with vague knowledge about investment, you can undoubtedly go for anSIP investment. This is a reliable investment route to invest in a mutual fund. An SIP does not need any big-ticket investment, which means you can start with a small amount of as low as Rs 500.
A SIP has the potential to provide a Compounded Annual Growth Rate (CAGR) of nearly 13%-15% p.a. over the long run i.e., five years and above. This means that as compared to other investment options, opting for the SIP route to invest in mutual funds can beat fixed-income assets and inflation over the long term by a wide margin.
Investment in small amounts
Investing a huge amount in one go is not something everybody can afford. Also, if you are new to market investment, it is not recommended for you to opt for lumpsum investment in mutual funds owing to your lack of knowledge about market ups and downs. Investing in an SIP is your saviour here. Despite putting a small amount of money over time towards anSIP, itresults in massive monetary benefits over the longterm owing to the compounding effect.
No need to time the market
Timing your market investments require sound knowledge regarding macroeconomic events, technical analysis, fundamental analysis, and other factors, so if you are new to market investing then tracking these factors may be difficult for you. Here’s where an SIP investment can benefit you as investing through a mutual fund SIP permits automatic and regular investment that prevents you from the dilemma of market timing. It even averages out the investment cost by buying more units during bearish markets.
While what type of mutual fund you want to invest in primarily depends on your risk appetite, financial goals, and time horizon, anSIP is a route that can be beneficial to investors in all types of scenarios. No matter whether you are a new or a seasoned investor, opting for SIP investments is recommended because of the various benefits they hold.