The Systematic Investment Plan or SIP follows a systematic and well-planned approach towards regular investments that gives investors outstanding results in terms of earnings and risk diversion over a time period. Continuing investments for a short-term may not bear the same results as one is expected to gain from being invested for a long-term horizon in SIPs. Let’s gauge the pros of being invested in SIP investments for a long time to understand why one should continue SIP for a long-term and not short-term.
Reasons why SIP should be continued for a long-term and not short-term
SIPs show the best outcomes when they are invested for a long-term. Investors can enjoy the following benefits only if they continue SIP for the long-term:
- The Habit of Savings: The reason why most people fail to save money for investment or for meeting their financial goals lies in the simple fact that they are not very good at savings. When people invest in SIPs they need to do it on a regular basis over a period of time and this develops a habit of savings in them. The longer is the time horizon of SIP, the stronger becomes their habit of savings which directly helps the investors to meet their financial goals.
- Cost Averaging: SIP simply doesn’t bother itself with the changing market behaviour and encourages investors to keep investing even when the market is low.Wheninvestors continue their investments throughSIPs for a long time they are able to lower the average cost of each unit they have bought from the market by selling at a higher price than the price they bought it for.
- Compounding Power:SIP ensures investors a steady flow of income on investments and allows them to reinvest the returns they have earned on their investments. When investors continue their investment for a long period, the returns earned on investments tend to magnify and keep compounding over time. This compounding effect assists investors in wealth creation and helps them to build a good corpus for the future.
- Corpus Creation:Systematic investment plans help investors to inculcate a sense of a disciplined approach towards regular investments. Investing a modest amount of money through SIP gives outstanding result in terms of returns and helps investors to build a strong corpus down the years. The longer investors continue their SIPs the better is their chance of strengthening their corpus fund and this is the only key for building a strong fund with limited investments.
- Risk Cushioning: The opportunity to diversify one’s portfolio through SIP help investors to rebalance their investment portfolio from time to time to generate maximum returns from changing market situations. Since the market doesn’t remain same all the time, continuing SIP for a long-term helps investors to ride out the market volatility easily while earning a steady income at the same time.
Having a systematic approach towards one’s investments is extremely crucial to succeed in different market situations. Learn more about the SIP and its long-term benefits by consulting our financial advisors and emerge as a winner in the investment field.Follow Us: