Mutual funds give you different investment choices. You can choose from a range of mutual fund schemes each of which has a different asset allocation and risk profile. Similarly, when it comes to the modes of investing in mutual funds, there are two options –
The lump-sum mode of investment is when you invest a lump sum amount one time into a mutual fund scheme at a given NAV.
SIP (Systematic Investment Plan) mode of investment, on the other hand, is when you invest small amounts at regular intervals (usually monthly) into a mutual fund at different NAVs.
The SIP mode of investment is the best mode of investing in mutual funds. Do you know why? Let’s find out –
What makes SIPs powerful?
When you invest in SIP online, here are the benefits which you can avail –
- Affordable and easy investments
SIPs are an affordable way to invest in mutual funds. You can invest as low as Rs.500 per month by choosing to invest through SIPs. This amount is low and easily affordable for small investors too. Thus, investors who have a limited capital to invest can choose the best SIP plans for investing in mutual funds with their limited incomes. Since investment is done monthly, it is affordable and does not pinch your pockets.
Moreover, investing in SIPs has become easy as you can do so online. You can choose to invest in SIP online through the mutual fund house itself. Alternatively, you can choose to invest through ETMONEY, the best investment website, which gives you the benefit of choosing the best SIP plans through comparing. You can simply complete your KYC formality online and start investing in SIP online within minutes through ETMONEY’s best investment website. Thus, besides being affordable, SIPs are easy to invest into too.
- A disciplined approach to saving
When you choose to invest through SIPs, you create a disciplined investment habit. SIP investments are usually done in monthly instalments through direct debit from your bank account. Thus, once you start a SIP, you can invest every month in a disciplined manner. These disciplined investments help you create wealth with small investments. Moreover, when you invest regularly, you can build up a sizeable corpus even with the little amount you save.
- Compounding of returns
Mutual funds give compounded returns wherein the earned returns get added to your investments to earn future returns. As you keep on investing through SIPs, your investments attract compounded returns and through long term investment, you can generate exponential returns through the power of compounding. For instance, if you invest Rs.5000 every month for 20 years at an average interest rate of 12%, you can accumulate a corpus of Rs.49.46 lakhs through the power of compounding. Amazing, isn’t it?
- Rupee cost averaging
When you invest in a lump sum, you should time the market to invest at the right time when the markets are expected to increase. If you invest and the markets fall, you would make losses. In the case of SIP investments, however, timing the market is not needed. Your investments are done at a pre-determined date every month. As such, the NAV on the date of investment is considered to buy the units. Even if the market fluctuates during the year, the effective NAV for your investment would be averaged out over different months. This rupee cost averaging factor helps beginners to invest in mutual funds through SIPs as they don’t have to monitor, track and time the market for the right time to invest.
These features and benefits make SIPs a powerful investment tool. You can, therefore, start your mutual fund journey through SIPs. Alternatively, if you are an existing investor you can start a new SIP or top-up an existing one to save more. Always compare and choose the best SIP plans for maximum wealth creation. The best SIP plans would give you the best and consistent returns and help build up your investment portfolio. To compare between SIPs, choose ETMONEY’s best investment website and invest in SIPs without any additional cost.