What are the benefits of investing in SIPs?

Systematic Investment Plans, also known as SIPs, is an investment option that enables you to accumulate wealth for a longer period of time by making small investments in mutual funds at regular interval of time. Many investors opt for this way to create a space for themselves in the financial market and enjoy the benefits of compounding.

There are two ways to invest in SIPs:

• Amount Based SIP

In amount based SIPs, you can invest a fixed amount of money according to your convenience. It gives you the flexibility to choose what type of mutual funds you would like to invest in.

• Quantity based SIP

In Quantity based SIP, a fixed quantity of shares of the company chosen by you is purchased for a pre-defined time period.

There are various benefits of investing in SIP:

• Disciplined Investment

By choosing to invest in SIPs, you are likely to get into the habit of saving regularly, which will play a vital role in achieving your future financial goals.

• Convenience

Investing in SIP is very convenient. After completing all the formalities, you can ask your bank to make auto-debits from your bank account.

• Rupee cost averaging

SIPs largely depend on market performance. These mutual funds are purchased at different rates thus allowing the investor to enjoy the benefits of rupee-cost averaging. Therefore, funds or stocks are purchased when the price of the investment is low and is sold when the market is high.

• Compounding benefits

You can start investing in SIPs even with a small amount at regular basis. It will eventually grow to a considerably large amount, thanks to compounding interest.

• Flexibility

It is not important to time the market while making a decision to invest in SIPs. It gives you the flexibility to invest and withdraw money at any point of time.