Starting an SIP: Building Wealth with Systematic Investment Plans

By Megha Jain, Content Writer  |  Friday, 15 September 2023, 07:16:55 PM IST

Starting an SIP: Building Wealth with Systematic Investment Plans

SIP, or a Systematic investing Plan, is an investing method that enables people to make recurrent investments in mutual funds over a predetermined time frame. It entails making fixed investments at predetermined periods, usually monthly. SIP is a well-liked investing strategy because of its many benefits. First off, it encourages consistent saves, which promotes financial discipline. The second advantage is rupee cost averaging, which enables investors to purchase more units when prices are low and fewer units when prices are high. SIPs also provide simplicity and flexibility because investors can begin with a small investment and progressively raise it. Starting an SIP is generally smart since it may lead to long-term wealth growth and encourage disciplined investment habits.

Types of SIPs

Depending on their investing goals and risk tolerance, investors can select from various SIPs. The following are a few of the most typical SIP types:

  • Standard SIP: This is the most popular SIP, in which investors pay a fixed investment amount over time at predetermined intervals.
  • Step-up SIP: Investors that participate in a step-up SIP regularly, often once a year, raise their investment amount. Investors who wish to raise their investment steadily might use this sort of SIP.

How Does SIP Work?

Understanding the underlying workings of SIP is crucial before discussing how to begin SIP investments. In the SIP investment strategy, people select a mutual fund scheme based on their financial needs and invest a predetermined amount into these schemes monthly. These investments may have a daily, weekly, monthly, quarterly, semi-annual, or yearly frequency.

Benefits of Starting a SIP in Mutual Funds

If you wish to get wealthy, start your SIP in mutual funds using the SIP calculator considering the reasons listed below:

Simply and Easy Investment

Regular investing is crucial for building wealth. Additionally, SIP aids in regularising your investment. You may set up ECS on your bank accounts and give your bank a standing order to automatically invest a set amount in SIP mutual funds each month. Automating your assets is simple and straightforward; otherwise, most of us tend to forget about them due to our busy schedules.

Rupee-Cost Averaging

Since there is no longer a need to time the market, it represents one of the most apparent advantages of SIPs. Due to their lack of experience, investors who attempt to time the market by placing bets based on fleeting market fluctuations risk losing money. SIPs eliminate guessing since they involve making set investments at predetermined periods regardless of the state of the market. You receive more units for your investment when the markets are down, and the mutual fund's NAV is low. Conversely, you receive fewer units when the markets are up. This lowers your average cost per allocated unit over the long run.

Brings in Financial Discipline

SIPs through share market app help you grow wealthy since they compel you to make regular investments. There is no other choice except to allocate a certain amount each month to SIPs. Therefore, by going the SIP path, you develop financial restraint.

The Benefit of Starting Early and Small

Making consistent investments and getting started early are the keys to increasing wealth. The minimal investment amount with SIPs may be as little as Rs 500 monthly. Even novice investors can build money by making a tiny monthly investment and then raise the amount as their income rises.

Conclusion

An innovative and simple way to invest in mutual funds is through a systematic investment plan. An investor is given the option to make fixed monthly or quarterly investments. The investor's whole wealth-creation process is simplified by this investing strategy, which assures discipline and frequent investments in the top mutual funds.

Because it lowers the volatility risk while investing in equities, it is a better approach to accumulating wealth than a lump-sum investment. Additionally, it offers returns on par with blue- chip companies, guaranteeing that your money will increase steadily and reliably.

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