We all know that FD is no longer a powerful investment option for creating our desired wealth for the longer term due to lowering rates of interest.
But Mutual Funds have become the talk of the town. There are various advantages of investing in the same. We not only can spend money on Mutual Funds in a lump sum mode like FDs but additionally we can invest in a Mutual Fund through SIPs(Systematic Investment Plan).
People doing a day job and incomes an everyday revenue ought to begin investing within the Mutual Funds through SIP mode. Investing by way of SIPs works in the same method like Recurring Deposits (RDs). One key distinction between the 2 is that you simply get models whereas investing in Mutual Funds. Another main distinction is that by way of SIP investing you’ll be able to earn comparatively greater returns than RDs. Further, the speed of returns in SIP Mutual Funds just isn’t fastened as within the case of RDs.
In the SIP or Systematic Investment Plan, a fixed sum of money is automatically invested in your chosen Mutual Fund on a specified date of every month. When you set up SIPs, your Bank Account is debited and your desired sum will get invested in your chosen Mutual Fund scheme.
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Why You Should Start a SIP?
If you’re a beginner in Mutual Fund investing, you might have this doubt why you need to go for investing by way of the SIP mode. Here are the ten best reasons why you should begin a SIP.
1. Automate your investments: You can set up SIPs to activate investments in the Mutual Fund from your Bank Account on a specific date. This results in growing a habit of investing within the Stock Market and helps you create a big amount in the long term.
2. Developing an investment behavior in the direction of your objective: SIP investing builds an everyday investing behavior for a person. So, if in case you have any financial objective, your nicely planned SIPs could make it extra possible to achieve.
3. Variety of investment plans: SIPs aid you spend money on Mutual Funds along with your desired quantity for a selected time period. Moreover, you’ve a wide range of schemes to select from in keeping with your financial wants like Equity based mutual funds, debt mutual funds, balanced funds, and so on.
4. Flexibility in investments: Using a Step-up SIP, you’ll be able to progressively enhance your SIP quantity with the rise in your earnings. In Mutual Fund investing, you’ll be able to select to stay to your common SIP quantity. But, if you want, it’s also possible to select to increase or lower (up to the minimum investment amount) your SIP amount with the assistance of a Flexi-SIP.
5. Affordable investments: When you spend money on the Mutual Funds by way of SIPs, you’ll be able to create an enormous capital over a protracted time frame. SIP investing doesn’t require you to speculate a big sum of cash in each installment. So, your family expenses are in no way hampered due to SIP investing. You can begin investing in SIP with an quantity as little as Rs 100-500 per month.
6. Rupee cost averaging: Investing within the Mutual Funds by way of SIPs fetch you extra units when the market strikes down and fewer units when it goes up. Therefore, this averages out the general prices of your investments over time.
7. You don’t need to track the market: You don’t need to know whether or not the Stock Market has hit all-time low or it has reached its peak. You can spend money on the Mutual Funds any time by way of SIP as its rupee price averaging function nullifies the market volatility.
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8. Long-term investment: Mutual Funds are usually meant for creating wealth in the long term. Investing by way of SIP allow you to make investments out there with small quantities over a protracted time frame. The greater is the funding horizon, the higher is the scope to earn bigger returns.
9. Power of compounding: The returns in your SIP investments are additionally reinvested out there. Therefore, you not solely earn returns on what you make investments but additionally in your reinvested returns. The longer you keep invested out there, the higher is your scope of having fun with the facility of compounding.
10. Diversification: You get the chance to get pleasure from the good thing about diversification whereas investing in SIPs. You can simply allocate your funding throughout numerous asset classes and industries. Diversifying your funding ends in decreasing your security-specific dangers and will increase your possibilities of earning bigger returns.
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Quick Note: Long term capital gains on an Equity Mutual Fund are tax-free if such gains don’t exceed Rs 1 lakh in a Financial Year. This goes to point out that Equity Fund investing through SIPs is a superb approach to accumulate an enormous investment in the long term. Further, Investing in ELSS as much as Rs 1.5 lakh in a Financial Year is allowed as a deduction towards Gross Total Income for a similar interval. Setting up SIPs in an ELSS may also help you achieve tax advantages with ease.