Wealth creation is an art and over the years it has changed its avenues and area of interest for investors.
In this blog, we will discuss what is SIP and what are the benefits of SIP?
SIP or systematic investment plan is a simple and time honored investment strategy for creation of wealth in a disciplined manner over long term period.
It aims at a better future for investors by giving a good rate of return as compared to one time investor in volatile market by lowering the average purchase cost.
It is evident from the recent slowdown that the Mutual fund invested trough SIP route has prevented the pitfalls of equity investment and is enjoying the high returns, if compared.
So it makes all the more sense today when the stock markets are volatile.
BENEFITS of SIP.
1. Power of compounding:
If money is invested at an early age one can make money work with greater power of compounding with significant impact on wealth accumulation.
2.Rupee cost averaging:
It is not so easy to predict the movements of the market.
An automatic market timing mechanism that eliminates the need to time one’s investments is Rupee cost averaging.
Though SIP does not guarantee profit, but one can invest through it as it goes a long way in minimizing the effects of investing in volatile markets.
3. Convenience:
It is very easy and convenient to operate through SIP route as it could be done by simply providing post dated cheques with the completed enrolment form or give ECS instructions.
The cheques can be deposited on the specified dates and the units credited into the investor’s account.
The SIP facility is available in most of the categories in domestic Mutual Fund industry.
SIP features:
If one would like to earn a good return from its principal then he should have a disciplinary approach.
The disciplinary approach is a vital to earning good returns over a longer time frame.
Once invested through sip route, investors are saved from bothering to identifying the ideal entry and exit points from volatile markets.
Conclusion:
Though SIP resolves a dilemma often facing investors due to ups and downs in the market price but investor finds it difficult to decide when to invest in the equity scheme.
The success of investors SIP hinges on the performance of his/ her selected scheme.
If the investor is able to make wise decisions and make the best of the Indian volatile market, SIP is definitely a powerful tool to create wealth over time.
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