Why SIP in Mutual Fund


SIP in Mutual Funds can help you achieve your short, medium and long term goals

Long Term Goals with SIP

If you are looking for long term investment with financial goal in your mind and want to create wealth over long period than you should start Systematic Investment Plan in Mutual Fund.You are planning to buy house, planning for your retirement, planning to buy a new Car, planning for children’s higher education or marriage all you need to do is start fulfilling your goals.Systematic Investment Plan helps you invest small amount of money on regular basis and gives you compounded return over a period.An amount as low as Rs. 2500 could grow to Rs. 19* Lakh in 15 Years

Brings in financial discipline in you

Investing regularly should be part of your long term goal, many investors start their monthly investment plan when there is optimistic environment market is trying to make all time high, and when there is pessimistic environment market is going down a correction is seen in market or market is in consolidating mood they stop investing when they should have invested more, be regular in your investment and bring discipline in your investment by developing habit of keeping fund aside for investment.So to stop and put an end to such investment strategies SIP comes as great saviour for investor.SIP forces investor to invest fix sum of money regularly on monthly/weekly/yearly basis, out of these monthly sip is popular instrument to look for, here money gets debited directly from your bank account.You can even fix a date in a month so that before you spend your money your investing money is already debited. This fixed sum of money over a period of time will turn you into disciplined investor.Creating large corpus for your retirement or children’s education or their marriages can only be achieved by setting aside a fixed amount every month over a long period of time.

Average your Purchase Cost

One of the most difficult part is timing the market, you cannot say when market has bottom out and is now going to reverse same you cannot say when market has picked and now it is time to sell.When market is going down you can accumulate more Mutual Fund units and less when it is going up, thus you are averaging out your purchase price by buying Mutual Fund units at different price levels.Thus, this is where SIP comes to help us in averaging buying price as your money gets debited directly from your bank account no need to give post-dated cheques.

Advantage from Power of compounding

Start SIP early as possible and get delighted with power of compounding by getting invested for longer duration. The beauty of compounding is that small amount invested regularly becomes a very large corpus so it is always advisable to start investing early from the time you start earning with smaller amount than waiting for large capital to start investing, to take more benefit earnings generated from your investment should be reinvested.With this you will make profits/gains with each unit invested goes up.Say one starts investing Rs. 2500 monthly in mutual fund for a goal reaching in period of 10 Yrs, this investment generating annual return of 12%, you would get Rs. 589,098.66 at the end of 10 yrs tenure.Now let us look at the scenario where you start your mutual fund investment after five years while you only have five more years remaining to achieve your financial goal with bigger amount in anticipation that you will be still able to achieve your financial goal, so you start with Rs. 3000 monthly investment in a equity fund for 5yrs with the investment generating return of 12%, at the end of five years you will get Rs. 252,909.19, this amount is less than what was your financial goal.

Achieve financial goals

Systematic Investment Plan is a convenient and disciplined way to approach investments to achieve your financial goals. Here you can decide investment amount and can start investing on regular basis through a SIP.Financial goals can be buying first bike or car, upgrading your car, going on vacation abroad, buying first house, children’s education and marriage, planning for retirement, after retirement you need regular income or long term wealth creation.All these goals can be achieved by investing in mutual fund.

Market time

Investing through an SIP helps you avoid timing the market

If you have very long term goals fall in the market is good time to buy but again it is practically not possible to predict how the market is going to behave very next hour or day. So never try to time the market keep your SIP going irrespective of market movements.

Conclusion

In short SIP in Mutual Funds can help you achieve your short, medium and long term goals.

Do not get settled by investing in a single mutual fund diversify your portfolio with at least 4 types of different mutual funds, this way you can enjoy the benefit of diversification.

Chose the funds based on your appetite for risk, going historically equities has given higher return than any other asset class over long period of time. Always consider your returns real by considering tax liability and inflation.

Managing investment by yourself is very tough job this requires financial knowledge tracking of market on regular basis along with what’s happening to your portfolio, if you are unsure always consult financial advisor as there are 43 mutual funds companies over 1000 schemes.

You can liquidate Mutual funds by getting money in your account within T+3 days, while liquidating a real estate property may take minimum 6 months to 2yrs.

Taxation is another benefit you get by investing in mutual funds, the return from bank fixed deposit is interest income this gets added to your regular income, but if you invest in debt mutual fund through SIP for minimum of 3yrs, the capital gain is taxed with long term capital gain tax payable at 20% with benefit of indexation.

With all these benefits we can say “Mutual fund sahi hai”

That’s why Team Comparte Capital Investment asks do you have “Nivesh Ki Aadat”, so let me do Nivesh