India is developing at a breakneck pace, surpassing many developed countries worldwide, resulting in the growth of the investment markets. Foreign investments are flooding into the country as we are approaching digitalization. India is the epicenter of investments, due to the rising tension in the Middle East, Russia-Ukraine, and China India has started becoming the first choice of every industrialist and DFI (Direct Foreign Investments).
This has led to a whole new trend of investing. Indian citizens as they are stepping forward in life are becoming keen towards investing. With the noteworthy growth, the SIP flows have set its record this year with the amount of 23,547 crore. The average monthly SIP collection which was around Rs.1200 crore in 2014 has shot up to Rs.4200 crore in 2017.
Many people are still confused about SIP, not knowing how to invest and what are the type in which they can invest. Where everyone follows the same route, it becomes difficult to find the answer ‘why’. Today a lot is investing but very few know the power of investing in SIP.
Let’s dig deep and understand why people are considering SIP over hundreds of investments.
What is SIP?
SIP often stands for a systematic investment plan, a convenient and disciplined way of investing a small yet fixed amount of money regularly into a mutual fund scheme. This plan minimizes the risk and also does not force you to make a large investment at once making it an affordable plan for everyone. It is considered the perfect way to build wealth over time through continued investing.
Why Choose SIP?
Rupee-Cost Averaging: This states that you should invest more when the market is low and less when the market is high. This will help you to average your cost thus reducing the risk.
Discipline: You learn discipline through being consistent. This investment option helps you to invest on a fixed interval, which helps us in being disciplined. It brings a sense of responsibility.
Power of Compounding: It means earning interest on both your initial investment and the interest it generates over time. By reinvesting, you will allow your money to work harder.
Accessibility: SIP is something that does not require a large amount. You can start with a small amount as low as 500 rupees. This makes it accessible to everyone of every age.
How To Start an SIP:
Investing in SIP is simple, as it doesn’t require enough investment or time. A SIP starts with:
Choose a Mutual Fund: Start first by choosing the mutual fund. Look out for mutual fund schemes that are according to your risk tolerance, investment horizon, and investment goals. A mutual fund’s performance can be judged by its performance, expense ratio, and its fund manager’s experience.
Select an AMC: AMC stands for the asset management company, these companies pool the investments from different investors and invest them in a diversified portfolio. Choosing the right AMC is important because it can decide your investment future. An AMC with a good reputation and good performance history should be preferred.
Set up your SIP: At this step after analyzing all of your risk-bearing capacity and investment horizon, you have to set your SIP amount. It can be as low as 500 and as high as 2,00,000 and more, depending on you. You also have to set the frequency of the investment.
Complete the KYC Process: To open a SIP, you need to provide all your personal information. You need a PAN card, Address proof, Passport-size photographs, and a canceled cheque for bank details. You can complete your KYC through the preferred AMC website or offline at their office.
Start Investing: As soon as your KYC process is completed, your investment journey has started. Now you can start investing your money in your SIP according to your capacity.
Benefits Of an SIP:
Diversification: SIP yet is a different investment option for your option. Your investment portfolio must be diverse and SIP can add much value to it. SIP can be chosen over FDs, stocks, gold, or post office savings.
Flexibility: Unlike other investments, SIP is considered very much flexible. You can have your dedicated tenure, amount as well as frequency. SIP also provides you the option to pause, skip, or increase your SIP.
Professional Management: If you are investing in SIPs, it can help you gain more knowledge and expertise in the financial world. Knowledge cannot be wasted, so the more you learn the more you will be able to invest properly in the coming future.
Tax-benefits: SIPs can be eligible for tax deductions under specific sections of the Income Tax Act. Investing in SIP can give you tax benefits. Under section 80C, you can save your tax payment.
Different types of SIP:
Regular SIP: This is the best-suited SIP in the market. It is the most chosen SIP by Indian citizens. Under this term, you have to invest at regular intervals, mostly monthly. It is mostly for disciplined and regular investors who want to earn a hefty amount at maturity.
Top-Up SIP: Under this SIP, you start SIP with a small amount and it increases periodically either annually, or monthly. Through this, you can take advantage of compounding and potential market growth. It is usually suitable for those whose income keeps on increasing or those who want to accelerate their wealth accumulation.
Flexible SIP: As the name suggests this SIP is flexible and can be set in any way. Under this, you can vary your investment and invest depending on your capacity. You can decrease or increase your SIP amount based on your financial situation.
Trigger SIP: Under this, you set your SIP as a trigger point, when the market reaches that point, your SIP starts automatically. It is usually useful for investors who want to capitalize on market dips or corrections.
Conclusion:
So, make your plan to invest.
The best way to invest is to invest in a way that gives you more within the span of time. Invest in SIP and secure your future with utmost security and flexibility.
For more information or query, you can consult Divadhvik, your financial friend.
