Investing through a Systematic Investment Plan is the most popular mode of investment in India today since it helps investors invest regularly and consistently grow their wealth. The SIP collection of mutual funds soared to ₹ 1.66 lakh crore in the year 2023, demonstrating the popularity of this particular investment method. This article enlists the key benefits of investing in best mutual funds in 2024 through the SIP investment mode.
Key benefits of investing in SIPs:
Here are the benefits of investing in a mutual fund scheme through the SIP mode of investment:
- Investors can benefit from Rupee Cost Averaging: When the Net Asset Value (NAV) of a mutual fund is low, investors generally purchase a higher number of mutual fund units. They purchase lesser units of the fund when the fund’s NAV is high. Doing this benefits the investor as the cost of purchasing fund units is averaged out over the tenure of the SIP. SIPs offer this particular benefit to investors, and it is called “Rupee Cost Averaging”.
- The power of compounding can help investors grow their wealth significantly: By investing regularly in a mutual fund scheme through SIPs, the returns that investors earn from these SIP investments can be reinvested in the scheme. As the years pass by, investors benefit from a snowball effect of growing returns and earn substantially high returns from their mutual fund investments.
- SIPs are a very flexible form of investment: Investors can choose to invest in a mutual fund scheme through the SIP mode by starting with an amount as less as ₹ 500 per month. Furthermore, SIP investments are flexible; and they help investors increase their earnings by increasing the number of monthly instalments. There also isn’t a limit to the number of SIPs that an investor can start.
- Investing in a mutual fund scheme through SIP is extremely convenient: SIPs are a very convenient way of starting an investment in India today. Investors can look up the features of a mutual fund online such as its NAV or past performance and start an SIP investment online. They can also automate their SIPs so that they don’t need to remember to make SIP contributions every month.
- SIPs help investors develop an investing habit: Investors can benefit from Rupee Cost Averaging only when they invest on a regular basis, and the SIP mode of investment helps them develop this habit.
Tips for investing in SIPs:
Here are three key tips that investors can follow while investing in a Systematic Investment Plan:
- Decide on an investment goal: Investors should note down their investment goals before investing in mutual funds through SIP.
- Use an SIP investment calculator: An SIP investment calculator can help investors plan for their investments in advance.
- Analyse a mutual fund before investing in it: Investors must analyse the features of a mutual fund scheme before investing in it.
SIP investments offer various benefits to investors who wish to invest in mutual fund schemes. Investors can grow their wealth by knowing about all the SIP benefits listed in this article.
