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6 Reasons Why You Should Invest In Sips

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By Author: Swarali Chavan
Total Articles: 36
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A Systematic Investment Plan or a SIP is a smart and hassle-free way of investing money in mutual funds. Through a SIP, an investor can make investments of a pre-determined amounts at a regular interval (weekly, monthly, quarterly, etc.). A systematic investment plan is a planned approach towards investments, and it will help the individual inculcate the habit of saving and building wealth for the future. A SIP mutual fund will allow an investor to invest a fixed amount regularly in a mutual fund scheme, which is an equity mutual fund scheme. A SIP is a flexible and an easy investment plan.

In a SIP investment plan, the money will be auto-debited from the bank account and it will be invested in a specific mutual fund scheme. The investor will be allocated a certain number of units that are based on the market rate for the day. Every time the money is invested, additional units of the scheme are purchased at the market rate and added to the investor’s account. If an investor wishes to invest in debt funds they can always opt for dynamic SIPs. The units are bought at different rates and the investors will benefit from the averaging and power of compounding. In a systematic investment plan, a pre-determined amount will be deducted from the customers bank account on a specified date and that amount will be invested in certain mutual funds.

6 reasons why you should invest in SIPs:

1. Always beneficial to have an expert:
An expert mutual fund manager will have a lot of experience in the field of SIP mutual funds as they regularly carry out a research on the company, industry and the economy which will help the investor make an informed investment. The mutual fund managers regularly track the market, so if an investor does not have the expertise and the knowledge about mutual funds will not need to devote their time and effort in understanding and can get assistance from the mutual fund experts.

2. Diversification:
Diversification means investing in 2 or more mutual funds at once. Generally, it is not advised to put all the investments in a single mutual fund. If the mutual fund does not provide a good result when the investor has invested all of their money in the mutual fund, then they will be in loss. Through diversification an investor will be able to get good returns. Diversification will reduce the overall impact on the returns from a portfolio.

3. The whole process is transparent:
The whole process of mutual funds is regulated by both SEBI and AMFI. An investor will be kept up to date about every step in the process. This will make it safe and convenient for an investor to invest through mutual funds.


4. Market timing is not important:
Since SIPs are a disciplined approach towards investing which does not require any market timing. If the markets are high, it may not be prudent to commit large sums at one go. SIPs help the customers overcome the problem of when.

5. Does not affect daily expenses:
Through SIP investments, a customer can invest small amounts as against large one-time investments. The process of investing becomes simpler as the investors daily finances won’t be affected.

6. Reduces average cost:
In SIP mutual fund, a fixed amount is invested regularly. Thus, the investor ends up buying more number of units when the market is down when NAV is low and less number of units when the markets are up and NAV is high.


Author Bio:- Swarali Chavan is a finance professor who loves study about market investment instruments. She has written on SIP. Through this article, she has provided detailed information on 6 reasons why you should invest in SIPs.

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