Importance of Investing in Mutual Funds SIP

SIP : Investment in mutual funds can be done in two ways. One is investing as a lump sum amount and the other is through Systematic Investment Plans (SIPs). Systematic Investment Plan (SIP) is a scheme offered by the mutual funds where one can invest a sum of money at periodic intervals. SIPS are a flexible method of investment wherein you can invest a fixed amount of your convenience in a mutual fund scheme at predefined intervals. In case of Sip, one can invest on a weekly, monthly or a quarterly basis as per his or her convenience. The fixed amount is deducted automatically from the funding account in the mutual fund of your choice on a particular date

Reasons working with an investment advisor can be Beneficial: -

Savings are important and every individual wants to save for the future. People always complain about not being able to save. Choosing SIPs to invest in at regular intervals will automatically translate into savings before you spend your money. Eventually, this will bring financial discipline and also fetch you good returns in the future.

More people opt to invest in SIPs as they allow an investment of as little as ₹500 per month. Even if at some point in time, your earnings are very low, you can still become a part of the Indian stock market by opting to invest in SIP plans in various mutual funds.

Unlike other investment plans, in SIPs you do not have to stress about timing the market to decide on the investment. This is because when the market is high, you will be allotted fewer shares, and when the market is low, you will be allotted more shares. The risk is minimised, thus ensuring you acquire investment at a lower average cost per unit share. Therefore, SIPs protect investors from making decisions in haste, panic or speculation, and safeguard them from the volatility of financial markets.

Investing in SIPs allows you to reinvest the monthly returns derived from the SIP into your investment amount until maturity.  So as time passes, you can expose your investment amount to the impact of compounding and helps you with the exponential growth of your investment, fetching better returns.

Most SIPs do not penalise or impose a fine if you wish to stop or quit the plan at any time. This benefit is not provided by any traditional investments like Recurring Deposits (RD) or Fixed Deposits (FD).

There could be circumstances when you do not have sufficient funds in your bank account to invest in SIP. SIPs allow you to pause your investment for a month or three months, without imposing any fines or charges. You can still keep investing like before in the following months. This is not a feature that an RD or FD can provide.

If you gain more disposable income every month, you can opt to start another SIP plan in various other mutual funds that invest in various other sectors or industries. You can diversify your portfolio by starting your investment in two or more SIPs. This helps you diversify your risks, and you can realise decent returns with the extra money you earned.

By investing money in open-ended funds of SIP, you can withdraw your SIP money at any time of emergency. This kind of flexibility can be of great help to meet your expenses in case of any emergency.

Apart from the many benefits mentioned invest in SIP, SIPs shield investors from many harms. Such harms could be short- term risks, emotional and repulsive reactions, overspending and short-term volatility. Therefore, you should invest in SIPs which are the most convenient way of investment in Indian equity markets through mutual funds.

Also, certain investment funds make you qualified for deduction from taxable income under Income Tax Act's Section 80C. Therefore, you can even save tax by investing your savings in a SIP. Due to these great benefits and flexible options, SIPs are the most convenient and popular plan for investing your savings.

• Starting investment at an early stage of life can fetch your huge returns in the future. You must hold investments for an extended period for getting compounding benefits.
• Systematic Investment Plan (SIP) is a scheme offered by the mutual funds where one can invest a sum of money at periodic intervals.
• A SIP can be perpetual or for a limited period of time SIP.
• In case of SIP, investment is done at periodic intervals over a long period of time which helps in beating the market volatility.
• It is not suitable for people who do not have a regular source of income

You can start a SIP either directly online through an AMC or offline through a mutual fund distributor. To know more about investment in SIPs you should get in touch with investment experts at DIVINE FINANCIAL INVESTMENT.