Surprisingly, the younger generation of earners is very concerned, enthusiastic, and active about investments and savings. Amid all the trading and market investments, SIPs have secured a spot as a safe and sound investment option with minimal risks and definite returns.
According to a global analyst and fund manager, “SIPs are the antithesis of the temptation to time the market.” Which means, SIPs are the grey in the black and white of the investment market. It creates an environment of discipline among the investors.
What Is SIP?
Small saving to make a bigger pot of money, is the essence of SIP. Systematic Investment Plan (SIP) is simply investing a small and fixed amount of money regularly, every month in a mutual fund scheme of your choice.
Investment in SIP often becomes a question among investors, they often end to be unsure about it. Amid this the question arises, Why should you invest in SIPs?- knowing the essence of SIPs, it is to create a serious and credible wealth in the long run.
Investing Made Easy: Why Is SIPs The Best Way To Build A Wealth?
Lets breakdown this question and know top reasons about how SIPs can create a credible wealth for you-
Small Investment At The Start
SIPs allow you to start with a small amount and gradually keep on investing. If you invest Rs. 5,000 every month for the next 25 years, at a 15% return, it will create a big vault for you of 1.65 crore. This will only cost you 15 lakhs, that too in small amounts of 5,000 every month.
Flexible And Convenient Investment Option
If you start a SIP today with a minimum amount of Rs. 5,000, you will not always be stuck with just Rs. 5,000. The flexibility of SIP allows you to increase or decrease your contributions at any time. SIP also gives you a convenient option to end and restart it at any time.
No Need To Become A Market Watchdog Every Time
SIP investment eliminates the need to time the market; you do not need to ‘Buy low, sell high’. With SIP, the focus is on staying invested, not on market timing.
Compounding Creates Wealth
Getting rich is easy, but creating wealth is a task. Wealth is created by compounding. This happens when you stay invested long-term and reinvest your returns. SIP gives you an environment to keep on doing this, compounding to create wealth.
Discipline
SIP teaches financial discipline. Waiting for a surplus to invest is unnecessary; you decide on an SIP amount and build your spending around it. The longer you stay in the SIP game, the more benefits work in your favor.
Tax Efficiency
SIPs in equity funds are easy and very tax-efficient for your pocket. Short-term capital gains are taxed at 15%, while long-term gains are taxed at 10% after a Rs. 1 lakh exemption. The fun part is that these gains are not added to your regular income.
Pause The SIP In Your Financial Crunch
You can pause your SIP investment in tough times due to a financial crunch or difficulty from uncertain circumstances. While it’s best to avoid stopping your SIP, you can pause it for a few months and restart later.
Lower Risk With Longer Time-Frames
SIP reduces the impact of market volatility by spreading investment over a longer period of time. According to data, if held for over 7 years, the chances of negative returns in equity funds are almost nil.
Convenience Of Online Transaction
All the SIP transactions you want to do can be done online via laptop or mobile. Most transactions, whether buying, redeeming, or switching, can be done online, making it easy to track and manage your investments.
