Benefits of SIP — 10 Best Advantages, Fixed MF VS SIP 2021
Using a systematic investment plan (SIP) to invest in mutual funds has become quite common. However, to invest in a SIP, you must first understand the benefits of SIP. So let’s have a look at them and also understand the Systematic Investment Plan:
What is SIP?
The word SIP stands for Systematic Investment Plan. You can invest a set amount in your favorite Mutual Fund plan on regular basis with this approach. Every month, a set payment is withdrawn from your savings account. The money is subsequently put into the Mutual Fund of your choice.
Now let’s Discuss the benefits of SIP in India.
Benefits of SIP
There are multiple benefits of investing in mutual funds through a systematic investment plan (SIP).
If you wish to cancel a SIP plan, there is no penalty. You can easily drop out of the SIP plan if you want to discontinue it. This is one of the major benefits of SIP of over recurring deposits (RD), which normally impose a fee if you choose to cancel them. After terminating your regular SIP investment, you have the option of receiving a refund or continuing to invest in the mutual fund.
If you don’t have sufficient money in your account for the SIP investment for a given month for a certain occasion, you can still enroll in the SIP the following month. There will be no fines or actions taken against you. In the case of RD, skipping a payment will almost certainly result in a fine.
You can easily start a new SIP plan in the same mutual fund or a different mutual fund if you begin generating more or if you are able to save more. That way, the excess cash will be put to good use in the long term!
The inability to save money is a typical problem among many people. The truth is that the more money you have, the more money you have to spend. This is why you should put money aside first, then spend. You invest before you spend if you schedule your SIP investment for the day after you receive your money.
SIP programmes allow you to begin investing in mutual funds with as low as INR 500 per month. Here are the finest mutual funds to begin with an INR 500 SIP commitment. Even if you don’t have a lot of money, you may benefit from India’s development by investing in mutual funds!
You’ve probably heard that investing in an overvalued market is a bad idea. You don’t have to stress about timing your investment when you invest through a SIP plan. During periods of extreme market volatility, your monthly SIP purchases fewer mutual fund units.
When the markets are down, a monthly SIP of the same amount buys you more units. As a result, you do not pay very high costs for each unit of a mutual fund in the long run. The process is known as rupee cost averaging.
Originally published at https://profitmust.com on June 17, 2021.
