Discipline
As the name says, the investment in an SIP is systematic. Investing through SIP inculcates discipline. In an SIP a fixed amount is deducted every month from your account and invested in your selected fund.
No Timing the market
SIP is a periodic investment which occurs across market cycles. SIP is not free from the market volatility and the fund value may go down, but it frees you from the worry of market movements.
Rupee Cost Averaging
When the market is high you get less units and when it is low then you get more units and hence your investment is averaged out. This helps the investor to not worry about market volatility and keep on investing while accumulating the wealth.
Achieve your Goals
SIP is a great tool through which you can achieve your financial goal by investing a relatively small amount monthly.
Guilt Free Spending
When you have done your investments for your goals at the start of your month through SIP, then you can spend rest of the salary as you want and you won’t have the guilt of not utilizing or saving the money at the end of the month.
Power of Compounding
When you start to invest early and invest for long term, you take benefits of power of compounding. For example, a monthly SIP of just Rs. 1000 done for 30 years will yield you Rs. 30 lakh if your investment earns a return of 12%.
However, if you start late by 5 years, then the same investment of 1,000 Rs. will yield you just Rs. 16.8 lakh which is 45% lower than the SIP investment started just 5 years earlier. Hence, even if you have only a small amount to invest, you should start an SIP as early as possible.
Easy to Invest
SIP can be started for an amount as low as Rs. 500. Investing in SIP is a hassle free process as the amount will be deducted monthly from your bank account automatically once your one time mandate is approved.