Planning to Save for Your Future from Today? Invest Now in SIP

We all work for money but we also need to make our money work for us too. The best way of doing this is by investing your money in the right channels. Proper planning and a disciplined approach towards investment can beat the inflation and help your money to grow in the right manner. The traditional modes such as fixed deposit and Public Provident Fund (PPF) do not provide adequate returns to live a financially secure life in your advanced stages. There are many market-related avenues such as equities and mutual funds, which give superlative returns but we do not have the know-how to pick the right equities or other assets. The solution to this dilemma is to invest your money in a Systematic Investment Plan (SIP).

Investment in mutual funds through SIP has gained immense popularity in recent times. This means pooling in money and investing it through Asset Management Companies (AMCs) under the guidance of an expert fund manager. A mutual fund is a long-term investment horizon, probably of 10-15 years. We usually shy away from equity markets because of the risk element. However, in SIP there is no risk element involved. Since the amount is invested for a long-term, there is no question of market volatility affecting the stocks.

Why should you invest in a SIP?

• Pocket-friendly
SIPs are the best way to begin your investment, as they are the most affordable way to do so. You can start investing with an amount as low as INR 500. Slowly, you can also increase your quantum of investment as your affordability or level of income increases. A low SIP amount offers convenience by helping you invest regularly without disturbing your personal financial commitments.

• Rupee-cost averaging
Rupee cost averaging is a technique that allows you to invest in a larger quantity of mutual fund units when the cost of purchase is low and in lesser units when the cost of purchase is higher. This brings down the average cost of purchase. Thus, it is known as ’rupee cost averaging method.’ This is a disciplined approach to investing, which leads to higher returns.

• Power of compounding
Your money is compounded in mutual funds, which means that it gives a higher return at the end. Compounding means reinvesting the returns at the same rate. This results in more growth in the principal amount. This process can even allow small investments to grow to a much higher rate. Some of the best SIP plans in India are those, which have performed consistently for a period of more than 10 years due to compounding.

• Flexibility
SIP is one of the most flexible ways to build your corpus. It allows you to invest at your own pace in your preferred mutual fund. You can choose to invest quarterly or monthly. You can always increase your investment as your income grows.

• Best for financial goal planning
SIPs are one of the best ways for building a corpus over the long-term. We all have some goals in our lives such as buying a house, overseas vacation with family, children’s education, and retirement planning, among other plans. Each of these dreams will be fulfilled through a huge corpus of the mutual fund, which cannot be made available immediately. A disciplined saving and investment plan through SIP will help you to have a larger amount at disposal when you need it the most.

In case, you want to know about the amount you will accumulate by continuing your SIP for a particular period, you can use the online SIP calculator. This calculator helps you to calculate the future value of the invested money.

What is the process for investing in SIPs?

It is very easy to start investing in SIPs. You can start SIP in an open-ended scheme at any time. It takes 10-30 days for the bank to register the SIP mandate.

The steps for investing in a mutual fund are:

• Do your research and choose the best SIP scheme based on your objectives, goals, and affordability. You must also check the performance of the mutual fund for at least a period of five years.

• Fill in the application form/SIP form, mention all the details clearly, support it with valid identity proofs, and ensure that your KYC procedure is complete.

• You need to submit the auto debit instruction or NACH Mandate to your bank.

• Once you are done with filling up the application form, you can handover your form to the AMC, relationship manager, distributor, broker, or any other designated authority.

• Another way is to start to SIP online. For this, you may log onto the respective fund house’s website directly or visit the distributing bank’s website. However, always choose direct mutual fund plans.