Be it the digital initiatives, the awareness campaigns, or the stupendous growth of the equity market in the past few years, equity funds in India are witnessing a widespread popularity. SIP plans being an excellent alternative to lump sum investment are preferred by a lot of investors who want to invest in equity funds. In this post, we’ll have a look at the benefits of investing in equity market through SIP.
A common reason for a lot of people to stay away from the equity markets was the lack of experience and knowledge about the market. However, equity mutual funds with their professional management have successfully eliminated this obstacle.
Another problem for many investors throughout the country who want to invest in equities is lack of a considerable lump sum amount. SIPs in mutual funds have effectively defeated this dilemma too. If you are planning to invest in equities, we’ll give you five reasons that make SIP a great choice.
- Be a Disciplined Investor
If you were to invest directly in stocks, you’ll be required to time the market to get the best returns. This can only be done by professionals with deep knowledge about the market, its analysis, and research. Needless to say, it is something that cannot be correctly done by inexperienced investors. SIP plans eliminate the need to time the market and make you a disciplined investor by investing a fixed amount every month.
- The Compounding Benefit
It is very important to start investing at an early age. As it can be difficult for most of the people to have a lump sum amount to invest when they are young, SIP proves to be a great option. When you invest through SIP in an equity fund for a long-term, the returns are compounded over the years to turn your small SIP amount into a large corpus.
- Rupee Cost Averaging
As you’ll be investing a fixed amount every month, you no longer will be required to time the markets with SIP. Irrespective of whether the market is at a high or low, you’ll continue investing the same amount every month. So, you’ll get more units when the markets are down and fewer units when they are high. This is known as rupee cost averaging as it averages the amount you pay to buy one unit of the selected mutual fund.
- Minimum Investment Needed
Most of the equity mutual funds in India now allow you to start an SIP with only Rs. 1,000 a month. This amount is something that can be easily afforded by most of the investors. Investing something every month is much better than not investing anything at all and the best Systematic Investment Plan provide you this freedom.
- Easy to Monitor
With SIPs, you can avail auto-debit feature which will debit the fixed amount from your bank account every month for investing in the selected fund. You also get the option of submitting post-dated cheques to your AMC. In return, the AMC provides detailed statements of your investment every month to help you easily track your investment.
As you can see, there are many different ways in which SIPs benefit people who want to start investing in the equity market. Just make sure that you select an equity mutual fund carefully in order to ensure that it effectively meets your financial objectives.