Top 10 Reasons Why SIP Is the Good Way for Mutual Fund Investment

Looking forward to investing in mutual funds but worried about the market volatility? Step ahead with SIP investment and stay secure from the market's ups and downs. SIP or Systematic Investment Plan as the name suggests helps plan your investment goals systematically. Want to know why SIP is considered the best way to invest in mutual funds? Keep reading!

Why Should You Consider Investing in SIP?

Beginner investors and even experienced ones can opt for SIP, considering their safe and seamless nature. Here are the 10 best reasons to consider it as an investment option:

1. Start with A Low Investment Amount

Unlike popular investment products like ETFs and FDs, SIP allows you to start investing with as low as ₹500 per month. You can invest in SIP even with low earning to save for future goals. It is an ideal mutual fund investment plan for youngsters who have recently started earning. So, with SIPs, you can be a part of the Indian stock market for as low as ₹500.

2. Know the Power of Compounding

SIP comes with a 'growth' option which keeps on reinvesting your investment returns to the invested amount until maturity. This is known as the compounding effect that helps generate maximum returns in the long term. However, it is only possible when you select the growth option while starting an investment. So, while looking for the best SIP to invest consider checking for this growth option for exponential returns.

3. Become A Disciplined Investor

You may start investing but eventually, lose track or lack interest in continuing with it. With SIP you can boost your investment discipline by automatically investing a selected amount each month. All you need to do is open an SIP account and set up the auto-debit system after paying the first instalment. SIP will do the rest! Gradually, it will help you become a disciplined investor.

4. Skip SIP During Budgetary Limitations

SIP does not mandate any compulsory monthly deposit or penalty for skipping investing in a month. You can stop investing in SIP anytime if you lack sufficient funds and start reinvesting when you are financially stable. SIP investment does not charge any fine for skipping.

5. No Stress Regarding Market Timing

Many individuals refrain from investing in stocks and mutual funds as they need to keep pace with the market timing. However, SIP does not come with any such requirements. You can start investing in SIP anytime regardless of the market situation. SIP will provide you with higher fund units when the market is declining and vice versa. Thanks to rupee cost averaging!

6. Adjust SIP Amount When Required

You can adjust your SIP amount as per your preference and convenience. It is not like that if you start investing with a minimum amount you have to stick to that. You can increase the investment amount whenever you want. For instance, if you have started investing in SIP with ₹500, you don’t have to deposit this fixed amount every month. You can raise the investment amount to ₹1000 or even ₹10,000 as per your ability.

7. Step-up Or Start Investing in A New SIP

Other than adjusting the investment amount in your existing SIP account, you can also start investing in a new one. For instance, you have received an increment and you want to save a part of that amount. So, you can either add that amount to your existing SIP or start investing in a new one. Research for the best SIP to invest your funds and open a new account to deposit the extra amount you can afford to save. 

8. Transparent And Seamless Portfolio Tracking

Mutual fund investment has been transparent and safe for investors due to the policies of SEBI and AMFI. According to these policies, every AMC should protect the investors from any sort of fraudulent activities. Following that, SIP maintains transparency and can be easily tracked.

When you choose to invest in SIPs through leading AMCs or other online platforms, you can manage your investment online. Moreover, they allow you to start, monitor, and stop your SIP investment online. You can redeem your investment units or opt for STPs and SWPs to a completely different scheme with just a few clicks.  

9. Reduced Average Cost

With SIPs you can purchase mutual fund units at lower costs as it allows you to invest across the market cycles. The mutual fund's Net Asset Value (NAV) rises as the markets are outperforming and lower when it's falling. So, when you are planning to invest for the long term, the average purchasing cost is lower compared to a one-time lump sum investment. So, SIP is a convenient and affordable option in the long run.

10. Prevents from Emotional Investing

While investing in stock markets, ensure keeping your emotions aside. Considering the volatility of the market, it may go through frequent ups and downs. As an investor, you should not go with the flow and invest during the high time with an expectation to earn more. The market may fall anytime. However, SIP does not allow you to go through these challenges as there are fund managers to invest your money in the proper place at the proper time.

Wrapping It Up

Now that you know what is SIP investment and why should you invest in it, you can start investing with a suitable amount. As you already know SIPs are flexible and you can stop investing any time you want. So, you don't need to worry about the financial burden. You can invest comfortably and conveniently with an SIP.