We live in a time, where the fixed deposits and the recurring deposits do not appeal to us anymore and the much appealing stock market venture seems alarmingly risky. During such a tricky market situation investing in any scheme seems risky to the investors, this is where the benefit of SIPs comes under the spotlight. The Systematic Investment Plan has emerged in this situation as one of the best and sure-shot ways of investments and wealth creation.
What is SIP?
SIP or Systematic investment plan is a plan designed for investing systematically over a span of time, preferably long periods. In the SIP scheme, the investor can manipulate the sum invested as per the market situation and may invest either for the long-term or for the short-term depending on their financial goals and requirements.
Why should SIPs be for the long term and not for the short term?
An investor should invest in SIP for the long-term for the following reasons:
To build a corpus:The systematic investment plan allows the investors to invest in the financial market in a very hassle-free way. It helps to inculcate a sense of discipline in them by engaging in regular investments. Investing in SIPs bores best results when done over a long period of time. When an investor saves a fixed sum of money on a regular basis for a long period of time, it enables the investor to build a strong corpus for the future even with a small principal deposit.
To lower the average cost per unit: The rupee cost average technique is an added benefit of investing in SIP, where the investor gets to invest a sum of money on a regular basis, regardless of the price of the units. The habit of investing regularly encourages them to invest even in the time when the returns are low, making them not miss out on great investment opportunities. It minimises the risk that usually arises during the downside of the market. Through consistent investments, the investors can lower the average cost of each unit in the long run by purchasing more when the price is low and less when the price is more.
To compound the interest:When an investor invests in the SIP for a long-term, they get to earn returns even on their returns. The compounding interest on the deposits keeps accumulating and helps the investors to build a strong corpus. Even if the investors have been saving up a very modest sum of money for their investment, they will witness a sharp growth in their funds in the long run.
When done systematically, an investment in the SIP for the long-term will allow you to reap benefits that you may miss out by investing in a short-term scheme. Invest in a long-term SIP to plan your finances well and to accelerate the process of wealth creation.
Consult our service to get more details about investing in a SIP for the long-term and avail our financial advice.