Investments in mutual funds through systematic investment plans i.e. SIP have increased rapidly in recent days. According to Amphi, the mutual funds' organization, there were 2.33 crore SIP accounts in July. SIP is, actually, a way to invest in various mutual fund schemes. In the face of new investors, there is often a question whether to invest in equity funds, fixed income fund or balanced fund, one should lump money in these schemes or invest a little in the long run.
SIP is the answer to this dilemma. As the name implies, the investor in SIP makes an investment plan, He keeps investing in a disciplined manner at regular intervals. It does not have the risk of investing at a time. An investor may have invested a large amount of money at such times when the market was at a very high level. In such a situation, the scope of return may be reduced or loss may occur if the market falls.
It creates a habit of investment: Let us understand it with an example. Mohan wants to invest Rs 1 lakh in various mutual fund schemes in 5 years. He is investing in a mutual fund for the first time. He does not know which fund should be invested or all the money should be invested at a time. After consulting with his financial adviser, he selects two schemes of Equity fund category, 3 schemes, and Balanced fund category.
The advisor has asked him to invest one thousand rupees every month. The market is fast or deteriorating, it has to continue investing. In this way, Mohan invests Rs.1000 in every scheme and a total amount of Rs 5,000 per month. Now Mohan advises his friend John to invest in SIP.
John does not have enough money to invest but Saves Rs. 1000 and decides to invest. Five years later, John feels that he has made a habit of savings and investment. During this time, he has collected a lot of money, through which he can achieve his economic goals.
Discipline is essential for investment: To say means the idea of SIP is very easy. It forces you to save. Long-term investment discipline brings perspective. So far the experience shows that those who have invested in a disciplined manner for a long time have benefited greatly.