In a systematic investment plan, or SIP, fixed amounts of your funds are regularly invested in a mutual fund based on your preferences. You can achieve this by linking your mutual fund account to your bank account, from which preset amounts are deducted. However, you should understand the meaning of SIPs and their advantages before making an investment decision.

If you are a new investor, you may be presented with different investment options, such as stocks, regular mutual funds, bonds, and commodities. However, why should you choose to invest in a Systematic Investment Plan (SIP)? One of the key advantages of SIPs is that they allow you to allocate funds according to your specific financial targets. Compared to a traditional mutual fund, where you must invest an upfront lump sum amount, SIPs provide more flexibility by letting you periodically invest smaller amounts based on your economic capacity. Even better, it’s possible to begin investing with just Rs.500 per period!

In order to make informed decisions about your future actions, you should be well aware of the advantages you get with a SIP investment. You may be interested to read below about the benefits of a SIP investment:

• Simple Plans – With a Simple Investment Plan (SIP), you can invest as little as Rs. 500 each time over a period of time and watch your money grow. It is convenient to monitor, and it doesn’t require much market expertise.
• Flexible Investment – SIP investments provide a great advantage of convenience and flexibility. There is no fixed tenure to worry about, and the amounts you choose to invest are adjustable. However, remember that having a long-term strategy in place is an essential part of creating wealth.
• Start SIP and Earn Higher Gains – Start SIP and Earn Higher Gains – If you start SIP investments, you will get high returns on your investment. Compared to traditional fixed deposits or recurring deposits, SIP yields almost twice the profit. This beats inflation, which is always on the rise.
• Interest that is Compounding – The inherent principle of SIP is that it works by compounding interest on all investments. You may invest a small amount, but will gain a large return over time if you hold your investment for a long time.
• The Meaning of SIP Means Emergency Funding – As SIP is an open-ended fund with no fixed tenure, it can be used as an emergency fund if you need financial contingency planning.