SIP: Big money VS Long-term

If you are aware of SIP, you must already know that SIP is all about the systematic discipline of investing a fixed sum of money at regular intervals for a long time irrespective of the market situation. When compared to other mutual fund options, SIP is not about a big money, it is about the long-term and this exact characteristic makes is suitable and attractive for investors who tend to have limited means of investment and a low-risk tolerance capacity.

What makes SIP suitable for the long-term?

An investor doesn’t need to put a large sum of money into a SIP investment; they can start their SIP investment with as low as Rs500. Besides this, the feature of investing at regular intervals makes SIP more advantageous than the lump-sum option of investment that requires a big sum of money to be invested at a go.

The SIP is bound by the objective of accumulating sufficient wealth and generating steady returns. Since investors invest at regular intervals, it allows them to enjoy the benefit of cost averaging that directly has a positive influence on their investment portfolio even when the investment market is in jeopardy.

These benefits of SIP explain why it’s not about big money but about the long-term:

  • Controlling Volatility:The investment market is volatile in nature and the risk of losing money amidst the chaos is high too.SIP tends to stretch over a wide time frame which helps the investors to even out the risks over time and also helps to earn steady returns from their investment.
  • Financial Goals: The willingness to lead a better life urges one to develop a financial goal and only a systematic approach towards such a goal can be met through regular investments for a long time. SIP is the perfect investment avenue to achieve one’s financial goals as it demands a disciplined and systematic investment approach on part of the investors for a long time to generate earnings.
  • Compounding Power: The SIP has been designed in such a way so as to facilitate investors with the feature of compounding that allows them to generate extra earnings through their investment. The compounding effect enables them to accumulate wealth over the long-term by allowing them to reinvest their earnings from the investment. Even when the invested sum is a bare minimum, over the years investors can generate sufficient wealth through the power of compounding.
  • Market Timing: The regular approach towards long-term investment not only aims at inculcating a habit of saving in investors but also plans to give them freedom from timing the market before every investment. The disciplined approach makes them aware about the functioning of the market and reduces their anxiety over making an investment in the staggering market.

The flexibility to create, update or cancel the SIP makes it a flexible option of investment for investors. To find out which SIP is best for your financial needs, contact our professional fund managers and find out how you can utilise SIP to create a strong corpus with your limited savings.

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Mutual Fund investments are subject to market risks, read all scheme related documents carefully. Past performance is not an indicator of future returns. Wealth Redefine is a AMFI registered Mutual Fund distributor – ARN - 167127

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