• HDFC
• 29 Aug 2018
• Systematic investment plan SIP

HDFC, Tester

 

All great things are a culmination of small steps taken over the course of time, andthe same stands true formutual fundsinvestments as well.If you are interested in in mutual fund investments but don’t know how to go about it, look no further!Systematic Investment Plans (SIPs) are just what you need.

A SIP mutual fund is a planned approach towards investing, for it allows you to invest a pre-determined amount regularly in the market, at specified intervals (usually monthly basis). It is an easy, hassle-free and flexible investment plan; wherein, a fixed amount is automatically debited every month from your bank account into your chosen Mutual Fund scheme.SIPs allow for participation in the stock market while bringing regularity ininvestments.

With such investments, you get the luxury to start small, along with the advantage of inculcatingfinancial discipline in investing andbuilding a solid corpusof wealth for the future.

Here are five things you must know aboutmutual fund SIP Investment- 

1. Allows you to start small and earn big.

Your first steps are the most significant ones in any endeavour. Similarly, SIPs can be considered as your initial steps in the world of investments. Given that you can start with an amount as small as Rs. 500, SIPs ensure that your regular financial routine isn’t strained while building a solid financial foundation for your future at the same time.

2. Encouragesregularity and discipline.

A SIP mutual fundbrings regularity and consistency in investments. One of the key factors to success is discipline and regularity in work. Similarly, your money needs to be disciplined as well in order for it to grow. Systematic investing is a time-tested discipline that makes it easy to invest automatically. It helps you accumulate a good corpus of money overtime.

3. Is a hassle-free investment option.

SIPs arean easy, hassle-free and flexible investment plan. They are a great mode of investment since they can easilybe subscribed to online and regular monitoring is not necessary.

 4. Reduces the average cost.

Regular investing ensures that the average purchase cost to you is evened out in the long run. A SIP mutual fund works on the principle of Rupee Cost Averaging. When the market prices are high, the investors get fewer units. When the market prices are low, the investors get more unit allotment. Thus, the investor remains in an advantageous position throughout the investment cycle.

 

5. Allows you to escapethe perils of the market.

SIPs aid you to escape market volatility by eliminating the guessing game of the market performance. Since SIPs entail regular investing, questions such as when to invest, what is the right time and the like are negated. This is especially great for small-time investors like us who are not very market savvy.

6.Interest on returns.

Consider the following situation.

SITUATION 1:Mr.A starts investing for his 60^th birthday at the age of 40.  Assuming the return rate is 7% and his monthly investment is INR 1000, his total corpus at the end of 20 years will be INR 5,28,000.

SITUATION 2:Mr.A starts investing for his 60^th birthday at the age of 20.  Assuming the return rate is 7% and his monthly investment is INR 1000, his total corpus at the end of 40 years will be INR 2,656,436which is more than twice the corpus accumulated in Situation A.