Data from the Association of Mutual Funds (AMFI) shows that the mutual fund industry has added on an average 9.32  lakh SIP account every month for the financial year 2019-20. Adopting the SIP route to invest in mutual funds has many advantages. Read on to learn more:
- Start Small This is one of the biggest advantages of SIP. You can start a SIP from as little as Rs. 500. It makes SIP extremely convenient for every income group. You can opt for any amount as per your convenience and increase it later.
- Inculcate a Disciplined Savings Habit SIPs help you inculcate a disciplined savings habit. This is because a fixed amount of money is debited from your bank account every month and invested. If you find it difficult to save money, adopting the SIP route can bring in the much-needed fiscal discipline.
- Spreads The Risk Mutual fund investments are risky as their performance depends on various factors, which are beyond the control of investors. However, with SIPs, these risks are spread over a period of time, which brings down the volatility in the long run.
- Build a Corpus For Various Life Goals SIPs help you build a corpus for various essential life goals such as higher education of children, their marriage and retirement. Depending on the goal and the corpus required, you can fix the SIP amount. In the long run, SIPs in mutual funds help you gain from the power of compounding, which has a multiplier effect on your wealth.
Even a modest SIP of Rs. 500 in a mutual fund offering annualised returns of 12% for a period of 10 years can help you garner a corpus of over Rs. 1 lakh. The corpus is bigger if the SIP amount is higher.
Since, a fixed amount is debited from your account at a pre-defined date and invested, it automatically leads to imbibing a disciplined savings habit.
Particularly, if you are investing in equity funds, the risk quotient is quite high. SIPs help you negate this risk to a great extent. If you want to gain from the inflation-indexed returns of equities, SIP in an equity mutual fund is your best bet.
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The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
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