Investment planning involves many calculations to help decide where to invest. Particularly for beginners, the risk of making common investment mistakes is quite high.
If you want to become a mutual fund investor, you might have the following doubts in mind:
- You may get higher returns over the long term from your investments but by choosing high-risk instruments.
- Failing to invest regularly can impact your investment portfolio severely.
- Sharp market volatilities may turn out to become difficult to stomach.
- Investing the entire corpus in one instrument is highly risky.
An online SIP investment through mutual funds is the cumulative clarification of all your doubts. By choosing an online SIP investment mode, you can prevent the pitfalls of risky investment decisions and also enjoy good returns.
Let’s start with the basics of SIP before moving on to its benefits.
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What is SIP?
A Systematic Investment Plan, also known as SIP, is a mode of investing through mutual funds that bring financial discipline. It allows you to invest a specific amount regularly in one or more mutual fund schemes of your choice.
It is a good option to start investing money for you if a lump sum investment schedule does not suit your finances. You can start small with online SIP investment and can also track your investments.
Benefits of Opting for Online SIP Investment
To understand how an online SIP investment can help you earn good returns, you must know how SIP works.
When you choose the SIP mode of investing through mutual funds, a fixed amount gets deducted from your bank account every month or at other regular intervals, as decided by you. The deducted amount is then directed towards a mutual fund scheme. As per the market rate, a certain number of units will be allotted to you.
Each time your money is invested via online SIP investment mode, you get more units added into your account. Also, you get the advantage of the following two aspects of investing:
Rupee-Cost Averaging
The market volatility cannot be timed, given the current condition of the Indian economy. The very nature of online SIP investment mode allows you to average out the cost of mutual funds units you purchase over time. The ratio of the total investment made over a period to the total number of units purchased turns out to be in your favor, thus giving you good returns.
Power of Compounding
The benefit of choosing online SIP investment helps in creating more wealth over time with its power of compounding. The earlier you begin your investment journey, the more returns you can receive. Understand it this way,
Irrespective of the amount you invest, you earn a specific interest over it, which gets added up to the principal amount to generate returns further. At the end of a long tenure, say twenty or thirty years, you will have a significant corpus accumulated for your long-term goals.
In other words, you can create wealth at a compounded pace with the help of online SIP investments.
How to Shackle Your Doubts About Investment Planning?
A big dilemma for a lot of investors is to understand when to invest in the market. You cannot predict when the market will rise and fall. With online SIP investments, you need not worry about timing the market.
To understand the impact of market volatility and take calculated risks, you can hire a financial advisory firm, like FinEdge. Keep in mind that for your investments to succeed in giving you good returns, you need a disciplined approach, which is what a SIP brings into the picture. To invest right, know your risk profile and identify the investment horizon.
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