Do you often go broke by the end of a month? Millennials today have a troubling habit of living big – they tend to spend all their money with the objective of enjoying life. Whilea bit of indulgence in materialistic aspects in necessary for one to enjoy their lives, one must not go all out. You must have the habit of saving to ensure a safe and secured future for you and your loved ones. One of the best ways to do so is investing in mutual funds through SIP mode of investment. Why SIP you may wonder. Let’s understand how SIP is the ideal mode of investment, especially for salaried individuals.

What is SIP?

SIP or systematic investment plan is a mode to invest in mutual funds that allow investors to distribute their investment amount into small, inconsiderate investment amounts. Under SIP investment, fixed, regular and automatic investments are made towards a particular mutual fund scheme at regular intervals. The SIP investment amount, periodicity of intervals, investment duration, the type of mutual fund you wish to invest in is all pre-determined before beginning with journey with SIPs. The intent behind SIP investment to provide investors with the convenience to invest in mutual funds as per their needs and financial goals.

Why SIP is ideal for salaried individuals?

Here are a few reasons why SIP mode of investment is the ideal mode of investment for salaried individuals:

  1. Disciplined mode of investment
    As automatic and regular investments are made towards mutual fund schemes at pre-defined intervals, an individual learns to save on a regular basis, thus inculcating the habit of disciplined investing.A salaried individual can set the periodicity of the dates on the day they are bound to receive their salaries. This will ensure that they are learning to save first than spending.
  2. Power of compounding
    As small, inconsiderable amounts can be towards mutual funds via SIP, an individual does not have to wait to accumulate a substantial amount and then invest in mutual funds. This means that an investor is able to invest early and for longer periods of time. This prolonged investment duration is rewarded by the benefits of power of compounding, also termed as the eighth wonder of the world by many.
  3. Rupee cost averaging
    As automatic and regular investments are made towards a mutual fund scheme irrespective of the market cycles and the volatilities in the market, an investor ends up investing in different market cycles. In essence, an investor is likely to receive more units of the scheme when the markets are low as compared to when the markets are high. This averages out the total cost of buying mutual fund units. This investment strategy is popularly termed as rupee cost averaging.
  4. No upper limit

There is no cap to investing in mutual funds through SIP. Additionally, an investor can invest a monthly of Rs 100 through SIP making it quite affordable for a wide range of investors. Salaried individuals benefit the most from this benefit.

  1. Online investment
    Thanks to advanced technology, individuals can now invest in SIP from the comfort of their home. They can open an investment account online, fill their KYC (know your customer) details, and provide the AMC with the necessary details. It is that easy to invest in mutual funds through SIP today.

You can also use an SIP calculator to get a better understanding of the future value of mutual fund investments at the end of the tenure. So, use this facility to your benefit and build towards creating a financially secured life. Happy investing!