In India, investing for long term goals was never accorded a priority by many. Most of us tended to manage the expenses from the income earned. Some invested only when there was a surplus left at the end of the month.
But sadly, even that was done by people in a very haphazard manner. Thankfully, with changing times, the importance of systematic investing has dawned upon the modern generation.
Online investing has transformed people’s financial positions for the better. In the times to come, people would add importance to research and financial planning.
The birth of SIPs 💰
A systematic investment plan – SIP – has managed to turn around the lives of many investors. With proper planning, early start and regular investments, many investors have been able to fulfil their lifetime financial goals.
From 1987 onwards, when more and more public sector funds started offering mutual fund schemes, the habit of investing got systematically inculcated in the Indian psyche. With liberalisation opening up the economy, 1993 marked a new era in the Indian mutual fund industry.
It saw the advent of private sector funds. Since then, there has been no looking back, and investors now have a wide bouquet of financial options available.
SIP in Mutual Funds vs. SIP in Stocks
SIPs in Mutual Funds enables investors to invest in mutual funds scheme regularly and in a systematic manner. When you invest, a certain number mutual fund units are allocated to you. The number of units received depends on the Net Asset Value (NAV).
SIP in Stocks enables investors to invest in equities on a regular basis in a consistent, amount/quantity-based way. When you invest in stocks or direct equities through an SIP, you invest a fixed amount of money over a period. This amount entitles you to a specific number of stocks.
How SIPs can make you rich?
Let us look at some exciting factors by which SIP can make you ultra-rich 💸.
1️⃣ Rupee cost averaging
The most significant advantage of a disciplined SIP is that it gives the investor the benefit of rupee cost averaging. Simply put, investors keep up with periodic investments for a more extended period. As financial markets are cyclic, you, as an investor, can add more units to your portfolio during the low periods. This strategy acts as good leverage over a longer time frame.
2️⃣ Avoid timing the market
It is famously said that it is nearly impossible to predict the markets.
Although everyone would like to buy at the lowest point and sell at the highest point, it is not probable. SIP in stocks help you build a discipline with continuous and regular investments, ensuring that lows and highs are captured throughout the journey.
3️⃣ Invest with even small amounts
Earlier, people would wait for a substantial sum to be accumulated before jumping into a worthwhile investment opportunity. But SIPs are designed differently. The goal is to help you invest a fraction of your earnings consistently.
4️⃣ Compounding benefit
The returns given by compounding are a mathematician’s delight. Over a while, a small amount invested repeatedly in the right financial tools gives returns that are nothing short of magical.
5️⃣ Top up as you go along
SIP in stocks instil in you a holistic approach to investing. It is essential that as you progress in life, more amounts are added to the SIP. Also, any one-time financial endowment should be used to top up your investments for better yield in the future.
6️⃣ Invest close to payday
Financial planners advise that you first devote a percentage of your income to invest, and then the remaining should go to various expense heads.
Traditionally, many of us used to do it the other way round. Investing close to payday ensures that the allocation to investment for future goals gets priority. Also, it gives investments more time to give better returns.
Parting thoughts
SIP in stocks helps build strong finances and grow wealth. Keep the habit of investing going for long, for only then will you be able to reap good benefits. Make sure you do a proper research before starting your SIP investment and open online Demat account with a trusted stock broker.
You can also read about these 5 Benefits of SIP Investment before you start investing.
Happy Investing 😇
Disclaimer: This blog is not to be construed as investment advice. Trading and investing in the securities market carries risk. Please do your own due diligence or consult a trained financial professional before investing.
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