How SIPs Can Help You Manage Your Money?
Updated On Sep 30, 2021
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Your financial security lies in being completely in control of your personal finances. Therefore, focus on your budgets, lower your expenses; so that you save more and accomplish the envisioned financial goals. Further, your savings need to be parked in investment avenues that are productive, whereby you benefit from the power of compounding, grow your wealth and counter the inflation bug better, as it otherwise erodes the purchasing power of your hard-earned money.
Investing in mutual funds is a promising avenue for wealth creation. The top-6 benefits of investing in mutual funds are:
- Professional management
- Lower entry level (you can start with as little as Rs 500)
- Economies of scale
- Liquidity and
- Innovative plans/services for investors (SIP/STP/SWP)
- But selecting the best mutual fund schemes in accordance to your risk profile, investment objectives, and investment horizon, is a critical task.
Benefits Of Investing In SIPs
Here are 5 benefits of SIPs:
SIPs Are Lighter On The Wallet
SIPs facilitate you to invest in smaller amounts at regular intervals (daily, monthly or quarterly). This in turn reduces your burden of defraying a lump-sum - at one go - from your bank account. If you cannot invest Rs 50,000 in one shot, that's not a huge stumbling block. The SIP route enables investments as low as Rs 500 per month.
SIPs Make Market Timing Irrelevant
Timing the market can be hazardous to your wealth and health. Instead, focus on 'time in the market' in the endeavour to create wealth by selecting the best mutual fund schemes with a dependable track record through SIPs and staying invested for the long-term. And if market volatility worries you, SIPs in fact can aid in managing (even-out) that volatility and prove effective, particularly when markets are at high.
Enables Rupee-cost Averaging
Many times, a SIP works better as opposed to investing a lump sum one-time. This is because of rupee-cost averaging. Under rupee-cost averaging, you typically buy more units of a mutual fund scheme when prices are low, and buy fewer mutual units when prices are high. This infuses good discipline because it forces you to commit cash at market lows, when other investors around you are wary and exiting the market. It also enables you to lower the average cost of your investments.
Offers The Benefit Of Power Of Compounding
Along with the habit of investing regularly, SIPs power your investments with the benefit of compounding. And if the equity market performs better, the corpus can be even greater provided the fund selection is apt. So, over the long-term, SIPs can compound wealth productively and systematically.
SIPs Are An Effective Medium Of Goal Planning
Buying a dream home, a car, providing good education to children, travelling abroad for leisure, and retirement are some of the vital financial goals of life. Once you have realistically identified the corpus needed to fulfil such goals, SIP-ping regularly in deserving mutual fund schemes can help in effectively achieving the financial goals. Notwithstanding the above, even to tide over contingencies, viz. loss of job, loss due to natural calamity, medical emergency and so on, SIPs in appropriate mutual fund schemes—can come to your rescue.
Well, by now you know that SIPs are a medium to invest in mutual funds. Hence, there's nothing like 'best SIPs'. You need to select mutual fund schemes in congruence to your needs to accomplish the envisioned financial goals, and in the interest of long-term financial wellbeing.
Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.