Top 5 Reasons Why You Should Consider Investing Through SIP for Higher Returns

However, before investing through SIP in mutual funds it is important to know what is SIP?. Systematic Investment Plan (SIP) is a process/method through which  you can invest in mutual funds. SIP offers a planned approach to investment wherein the investors can invest a specific amount of money per month at the predetermined date.

Further in this article, we will elaborately discuss the top 5 reasons why you should consider investing through SIP for higher returns.

1. Financial Discipline

   Most of the investors prefer investing through SIP Investment because of the benefit of maximizing profit. However, besides the advantage of wealth creation, the most important perk of investing through systematic investment plan is that it inculcates the habit of financial discipline in the investor’s life. With SIP, the investors are destined to invest a specific sum of money at a predetermined date regardless of the market conditions. As the amount of investment is auto-debited from the investor’s account, it simultaneously reduces the chance of missing out on investment . SIP  helps the investor in  creatinga financial backup by investing a small sum of money over a long period.

2. Achieve Financial Objective

   To achieve the financial goals of life, it is significant to have smart financial planning. Whether one wants to make a short-term or long-term investment, SIP is a goal-oriented process of investment. The investors can start SIP by making a minimum monthly investment of Rs.500 and can invest up to the maximum as much as they want in any of the best sip plans. By making a small investment over a long-term period you can achieve your  financial goals in the expected time. Besides this, there are a lot of open-ended funds that offer liquidity. This allows the investors to withdraw their investment in case of an emergency.

3. Offers the Benefit of Power of Compounding

   Through the benefit, of the power of compounding the investors can gain interest by reinvesting the interest earned. In the power of compounding the first investment made by the investors and the gained interest in it is used to earn the interest for the next period. One can also take the help of the SIP Calculator  to estimate the maximum return on investment. Therefore, the benefit of the power of compounding helps the investors to turn small investments into a large corpus. Hence, the early an individual starts making SIP investment, the larger wealth they can accumulate over a long-term period.

4. Don’t Need to Time the Market

   Mostly, the market experts advise the investors, to invest when the market performs well. However, in the case of SIP, the investors do not need to worry about the timing of the market. Most of the investors often invest in stocks when the price is low and sell them when the price is high. Thus, timing the market is not only time consuming but also riskier. On contrary to this, by the advantage of rupee cost averaging one just need to invest a pre-determined amount continuously for a longer period. Since the amount invested by an individual is constant one can buy more units when the price is low and lesser units when the price is high which in result will lower the average cost.

   
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5. Diversifies the Investment

   Investors who want to do smart financial planning should not keep all the eggs in the same basket. As per the market experts, the investors should allocate their money in diversified asset classes instead of putting all the money into one asset. The process of putting your money in different asset classes is known as diversification. By diversifying the investment and allocating the money in different investment securities reduces the risk of fluctuation in returns.  SIP offers the advantage of diversification. With the minimum investment of Rs.500, the investors get a bigger exposure to investing in different investment securities as per their suitability and requirement. It helps to reduce market risk and increases the chance of wealth creation.

   Once you are aware of the above information you can start your SIP investment.