What Are The Benefits Of Sip Investment In Mutual Funds? Explained In Detail By ETMONEY


Every individual has a goal to achieve, be it buying a new car, a bigger house, a family vacation and much more. However, one can achieve these goals only by actively working towards them. How? By investing wisely in Mutual Funds through a Systematic Investment Plan (SIP), which can help one in achieving their goals in a less complicated manner. What is SIP? A Systematic Investment Plan is a type of investment through which you can invest in Mutual Funds periodically with sums you are comfortable with, instead of investing a lump sum amount. The payments can be done on a monthly basis. Investing consistently for a set period of time in SIP can yield attractive returns at the end of the tenure, which can help you meet your financial goals. 

How Does Mutual Fund SIP Work: 

When you invest in Mutual Funds through SIP, certain units are allocated to you depending upto the invested amount and fund NAV (per unit price of a fund). If the markets are down you will get more units for the same invested amount while during inflated market conditions you get less units for the same amount. This helps you average the buying price and generates better results in the long run and you don’t have to keep a tab on the markets for the right time to enter with your investments. The tenure of your SIP investment and frequency can be decided, and you can also choose to automate your investments to debit the SIP amount from your bank account into the SIP Mutual Funds of your choice. 

So, what are the benefits of SIP investments? 

Low Investment Amount: 

The foremost reason for investing in Mutual Funds through SIP is that you can start investing for an amount as low as Rs.100 a month, which is quite affordable for any investor. Secondly, you can increase your investment amount at any given point of time according to your comfort level. Furthermore, you can always top up your SIPs whenever your financial standing improves, which makes it one of the most preferred methods of investing for many in India. 

Rupee Cost Averaging: 

One of the major benefits of investing through SIP is that you can purchase more units when the Net Asset Value (NAV) of the fund is low, and lesser units when the NAV is high. This averages out your purchasing costs over the tenure of the investment period. Furthermore, you don’t need to time the market when investing through SIP which is its most attractive benefit. 

Ease of Investment: 

It is one of the most convenient methods of investing, as you don’t have to go through in-depth market research or analysis before investing. All one needs is to pick up a good fund and let the fund managers do the rest. You can check the funds best for SIP on ETMONEY’s best SIP funds collection. You can also give standing instructions to your bank which further eases the job of keeping a tab of your investment dates and time as the banks can deduct the SIP amount from your account on the stipulated date.