Systematic Investment Plan is quite familiar with the crowd now but let me still feed the same once again. It allows the user to build his/her wealth through tiny investments on regular intervals. This helps the investor to avoid the risk of timing the investment and also reduces the burden of lump sum investments at one go.
Here the question might arise that why SIP? As there is a disciplined approach and instead of timing the market, it is advisable to give more time to the investments to produce healthy returns. It helps to harness the power of two quality strategies the power of compounding and cost averaging.
The benefits don’t stop here, if Mutual fund helps to diversify the investment in a basket of securities, in addition SIP helps to diversify the time of investment as well. This is one of the key element focused while investing. Many small investors fail to adopt the advantage of investing in SIP. Destroying the whole purpose of SIP scheme by stopping the SIP scheme during market slump. The investor forgets the chance to buy more units at a lesser price.
Stock market is known for its volatility. Investors usually try to circumvent the problem by timing the market: purchasing when the market is down and selling during the peak. But timing is not an easy thing to practice. You can never be sure whether the market has hit the bottom or it won’t fall further. Or, the price won’t rise further. The only way to handle such uncertainty is to average out your purchase cost over a period of time through systematic investment plan
You can also set up the SIP date right after your salary date to ensure that you do not spend money before investing. It is almost impossible to create a large corpus unless you invest a small amount regularly over a long period. Invest now
