Why is SIP the best friend of mutual fund investors?


We all have been hearing a lot about SIP mutual funds. Each and everyone is interested in finding out more about this investment option. Investors are now looking forward to investing in mutual fund investment through SIP. Investing in mutual funds through SIP is good for investors because of many ways. 

Why is Mutual Fund Investment through SIP good?

  1. It develops the saving habit – The most important benefit of SIP is that it helps in cultivating the habit of saving and investing. Investing through SIP infuses the feeling of commitment as you need to keep a fixed amount aside each month for investment. Systematic investment plan allows you not to postpone any of your plans and leaves you in a better position.
  2. Helps in accomplishing the financial goals – Without proper planning, it’s difficult to accomplish the things that you want in your life. In such cases, mutual funds can be your way out. Whether it’s your long term goal or a short term goal, SIP mutual funds will allow you to accomplish them. As the entire process of SIP is goal-oriented, it keeps an investor on the right track. All your goals and purposes are achieved at the right time. 
  3. Low speculation cost – It’s obvious to have an expectation of wealth creation from investment. In the case of equity investment, you need to have a reliable method to make money. Another easy way to make money is to lower your investment costs. The mutual fund allows this in a streamlined fashion through the rupee-cost process. In this, the fund manager keeps on purchasing the units with the monthly SIP irrespective of the condition of the stock market. Therefore more unite are bought during the slump of the market, and lesser units are bought during the market rally. In this way, the cost of investment is decreased dramatically. 
  4. Power of compounding – When you earn interest over the interest, this is called compounding. In this, the interest on the investment and the interest earned on it both are used to find the interest for the next period. Compounding allows you to get higher returns when you are on your investment journey.
  5. Diversification – Instead of putting all your money on one asset, you should diversify your investment in various assets. If you are investing in similar assets like equity, then you will have to buy at least 4-5 various funds in your portfolio. 

This includes dividing your investment among the various securities so as to reduce the risk of fluctuations. To earn profit from the investment, you should know how SIP works in mutual funds.