It is an investment route offered by Mutual Funds wherein one can invest a fixed amount in a Mutual Fund scheme at regular intervals – say once a month or once a quarter, instead of making a lump - sum investment. The installment amount could be as little as INR 500 a month and is similar to a recurring deposit but with the potential to receive better returns.
Benefits of SIP
a. Convenience with automated payments
It is common to forget or delay SIPs or prompt lump - sum investments due to any given reason. SIP offers you the convenience to directly debit the amount from your bank every month.
b. Disciplined saving
SIP installments can be as little as Rs 500 a month. These periodic installments instilling a habit of regular saving from a young age and reduce the burden of lump - sum payment like in other investment option (gold, real estate etc. ).
c. Guarantees better returns in the long term
SIP is computed on the principle of compounding which guarantees better returns in the long term.
Compounding is similar to the rolling a small - sized snowball down a hill. As it rolls down and continuously picks up snow on its way down to make a larger snowball, so is the case with SIP.
d. Flexible
SIPs can be started, stopped and resumed anytime as per the individuals’ need.
The above benefits indeed make mutual fund investments very appealing. People feel that to earn meaningful returns, large sums must be invested in Mutual Funds. Let us see how beneficial is investing in Mutual Funds with just ₹ 500 a month. <
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*The returns shown in the table are purely hypothetical and for illustration purpose only
Indeed the saying "Little drops of water make the mighty ocean" holds true for SIP and are easily the best way to enter the world of investments for the long term. Always remember to start early, invest regularly to maximize your returns.
Disclaimer: Mutual Funds investments are subject to market risk, read all scheme related documents carefully.
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