Benefits of SIP
SIPs are light on the wallet
SIPs enable you to invest in smaller amounts at regular intervals (daily, monthly or quarterly). This in turn reduces your burden of defraying a lump-sum – at one go – from your bank account.
If you cannot invest Rs 5,000 in one shot, that’s not a huge stumbling block, you can simply take the SIP route and trigger the mutual fund investment with as low as Rs 250 per month.
SIPs make market timing irrelevant
SIPs can help you manage (even-out) the market volatility well. Timing the market can be hazardous to your wealth and health. Instead focus on ‘time in the market’ in the endeavour to create wealth by selecting the best mutual fund scheme to invest.
Studies have repeatedly highlighted the ability of equities to outperform other asset classes (debt, gold, even real estate) over the long-term (at least 5 years) as also to effectively counter inflation.
Now one may ask: If equities are such a great thing, why are so many investors complaining? Well it’s because they either got their stock or the mutual fund wrong or the timing wrong. In our opinion both these problems can be solved through a SIP in a mutual fund with a steady track record, stay invested for the long-term as the SIP route enables you to even-out the volatility of the equity markets effectively.