As a child, we have all dreamt of growing up and earning lots of money. But then we actually grow up and realize that things aren’t really as easy as they seemed to us while we were young.
Making money isn’t easy and that’s how we try to save while we can. But is just saving enough? We all know the answer to this question very well. It isn’t and that’s where investments come into picture to save us from an uncertain future.
With the variety of investment avenues presented before us, how to know which one is the best for us? Well, after having gone through quite a few of them, I suggest SIP is the best for the people who have a constant earning.
SIP or Systematic investment plan is an investment avenue wherein the amount that the person wants to invest is automatically deducted from his bank account and put forth in a mutual fund scheme. Units for that scheme are allotted to the concerned person on the basis of the net asset value on that day.
Now, how an investor benefits from SIP? Well, for each time the money is invested, units are bought at the NAV at that time and so, with different units at different prices, an investor benefits from rupee cost averaging and also the power of compounding.
Now that we’ve understood the basics of SIP, let’s get down to the benefits that one can avail through it:
Rupee cost averaging:
We all look for silver lining before taking the huge risk. The same is the case with investing in stock markets. Since it is unpredictable in nature (in the short term especially), we always have it in the back of our minds that someday the prices will sky rocket and we’ll get the best profits. That’s why one must go for the long term investment.
With SIPs, you invest regularly in the market and units are allotted to you depending on the NAV prevailing. With units of different prices in your kitty, one can easily achieve much lesser average cost per unit.
We all know the power of compounding. By reinvesting the amount that we’ve received as returns, we can easily reach a huge milestone in the years to come as SIP is done with a long term plan in mind.
We already are in the generation when we don’t have much time to spare to think about anything other than the job that we have at hand. That’s the reason many people start investing quite late in their careers. SIP is the answer to our woes.
SIPs inculcate within us a habit of investing regularly, only we have to start once. With SIP being pretty valuable in the long term, a salaried person can always go along with large caps in equity market.
Option to discontinue:
Many times situations aren’t in our favor and so we might have to pull out our money from the market. SIP gives you the option to do that too or you can decrease the amount in case you don’t want to completely discontinue. Once you feel that you can take more risk, you can always increase your amount.
Easy and hassle free:
If you are too busy to do it yourself, ask your bank to help you out with it. Just instruct them to auto debit the amount to be invested on regular intervals as per your convenience that can be either monthly, quarterly etc.
Now, why SIP and the normal lump sum investment method which we have known from a long time?
Well, in SIP you actually regularly invest and the amount can be pretty minimal too which ensures that you are not in any situation of financial crunch because of investment.
Also, it inculcates within you a habit of saving aside regularly, which is tough to come by during early years of your career. Above all, the best benefit of SIP is the rupee cost averaging, which will help you in staying in this highly volatile market.
Now that you know as to why SIP is the best option around for a person with constant earnings, go and select the best option suitable for you!