Investment in SIPs has crossed the Rs. 13,000 crore mark as of October 2022. Retail investors are participating in mutual fund investment through the SIP mode as they are seeing the benefits of investing through this methodology. As an investor, you can use a SIP calculator to calculate your returns from SIP investment and then take the plunge into investment. In this blog, let’s look at the various ways in which SIP investments can benefit you.
SIP stands for Systematic Investment Plan. It is a method of investment wherein people can invest a small portion of their money at regular intervals of time. For example, one can invest as little as Rs. 500 per month. This creates an unemotional approach to investment. There are typically 3 major benefits of investing in SIP which we shall see below.
Rupee Cost Averaging is a simple concept. It means that when the Net Asset Value (NAV) is low, one gets more units of a mutual fund, but when the NAV is high, one gets fewer units of the mutual fund.
This is an advantage only because one gets a lot of units during a market downturn. In lump sum, you will however get only a fixed number of units. When the time comes to redeem the units, SIP will fetch you more units than a lump sum investment. Use a sip calculator to calculate your returns from the SIP. However, getting more units of the MF does not mean you will get more profits.
This is often called the eighth wonder of the world. Compounding occurs when the interest earned from the investment, is reinvented with the original corpus. In this way, the original corpus continues to earn and grow. Every time your investment grows, it is reinvested making the original corpus grow larger into quite a substantial sum.
SIP investment causes discipline in investing. Even the most experienced investors make mistakes when it comes to timing the market. So, if you are a first-time investor can you expect any better?
Discipline is very essential in investing as you do not take emotional decisions to invest. That means you can invest with a clear, calm mind. SIP calculators help to manage investment in the same.
You can utilise a SIP calculator to calculate your returns from the MF schemes. Remember that SIP investment is the perfect mode of investing for first-timers. As you grow in knowledge, you can start investing in the lump sum method of investment.
