Systematic Investment Plan (SIP) is a technique of investing in mutual funds through small, periodic installments. In SIP, a fixed sum of money is deducted from your savings account every month as a contribution directed towards your goals.
This technique of investing is an easy, smart and time-tested approach to achieve financial goals.
SIP is judged to be the most suitable way of accomplishing financial goals because of the two advantages it possesses:
Power of Compounding: Compounding investment earnings can turn small funding into a mountainous sum after a span of time. The best way to enjoy the benefit of compounding is to begin saving and investing prudently as soon as possible. At a 15% rate of return, the value of Re. 1 after 5 years would become Rs. 2; after 15 years it would become Rs. 8 and after 30 years, it would become Rs. 64.
Rupee Cost of Averaging: With SIP, the investor must purchase more units when the price drops and less when the price surges. Therefore, the cost per unit is averaged out.
“Investment says if you worry about ‘THE HOW’ you’ll never start. It can be SMALL but at least START.” ~ Anonymous