HOW SIPS BECAME THE MOST POPULAR MODE OF INVESTING IN MUTUAL FUNDS
A Systematic Investment Plan (SIP) has almost become synonymous with mutual fund investments in the country. Earlier in the year, SIP mutual fund accounts crossed the five-crore mark. SIP investment in mutual funds are preferred by not just people who are new to investing but also those investors who have already have an investment portfolio. But why is that? Why are people increasingly choosing to invest in SIP mutual funds when they want to make mutual fund investments? Let’s explore some of the most prominent reasons.
- Can choose an amount as low as Rs. 500
Even if your monthly budget does not leave a lot of money for savings and investments, an SIP still allows you to invest and participate in the stock market and other asset classes with an amount as low as Rs. 500 a month. One of the common reasons people delay investing is because they don’t have enough funds to do so. But SIP mutual funds remove that barrier and make investing accessible for everyone.
- No need to time the market
When you invest in mutual funds through an SIP, you do not have to worry about timing the market. SIP investments follow the rupee cost averaging strategy where they buy more units when the market price is low and fewer units when the price is high. This balances or averages out the cost of your investment and also helps with reducing the impact of market volatility.
- Helps with disciplined savings
While personal finance wisdom says that one should save before they spend, usually people first spend and then save whatever is left. However, SIP investments help build a disciplined savings and investment habit as the SIP amount automatically gets deducted from your bank account as per the SIP frequency.
- Can increase the SIP amount
When investing in SIP mutual funds, you can opt for the step-up SIP option which offers flexibility with increasing your SIP amount. This option allows you to increase your SIP amount either by a certain pre-determined percentage or amount at a pre-determined schedule so that with an increase in income, your investment also increases.
- Makes allowance for skipped payments
If you do not have funds, then you can skip your SIP payment for a month. Usually, there are no fees or charges for this. It’s important to remember, however, that three consecutive months of skipping payments will lead to the termination of your SIP investment by the fund house.
Due to all these reasons, SIP mutual funds have become the most popular mode of investing in mutual funds now. Another benefit of SIP investments is that it is easy and convenient to invest in mutual funds online through this option. You can directly go to the website of the Asset Management Company (AMC), pick your preferred fund, finish the quick KYC process online and begin your SIP investment.