Using a structured investment plan like SIP to invest in mutual funds has become quite popular. Continue reading to learn why mutual funds are such an excellent way to invest, along with the benefits of SIP to support your future financial goals.

Everyone has dreams, ambitions, and objectives they want to attain. For example, everyone wishes to be financially secure in their lives. For example, a new car, a bigger house, or a family vacation to an exotic location. However, you can only achieve your objectives if you put up the effort necessary to make them a reality.

Using a Systematic Investment Plan (SIP) to invest in mutual funds might be a straightforward solution to help you reach your objectives. So, let's look at what SIP stands for, how they operate, the benefits of SIP, and how your financial goals can seem attainable by investing in SIP

• What is SIP?

A Systematic Investment Plan (or SIP) is a mutual fund investment that allows you to invest over time. It is a systematic way of regularly investing fixed amounts of funds, such as monthly, quarterly, or semi-annual. It may be simpler to reach your financial objectives if you invest consistently in this manner.

SIP in mutual funds is a monthly investment plan in which you invest a certain amount of money in a scheme of your choice. The money is automatically deducted from your bank account because of the setup.

• What are the Benefits of SIP in Mutual Funds?

             MARKET VOLATILITY DOES NOT AFFECT THE INVESTMENTS

Markets reflect the economy, and just as the economy experiences ups and downs, so do the markets. So while a drop in the market might wipe out some of your gains, a SIP can make these dips work in your favor.

One of the advantages of SIP prevents investors from speculating in highly volatile markets. When the market is low, investors may buy more units, and they can buy a few units when the market is high. As a result, the long-term average cost of each unit is anticipated to be cheaper, while the investment returns are excellent.

Because you invest every month, the NAV of every scheme varies, and you receive a different amount of units each month. When the markets rise, the price will increase each month, and you will receive fewer units. When the cycle reverses and markets begin to decline, the purchase price drops, and you start to get more units for the same investment. Rupee Cost Averaging is the process of investing at different periods of the market to average out the costs.

•  Start small, grow big

One of the biggest benefits of SIPs is that you don’t need to have a huge amount of money to begin investing. You can start with as little amount as ₹500 per month. 

Start early, small & leverage the power of compounding which will help you in wealth creation over a long period of time.

You can check out REPOLA mutual fund portfolios which are well-researched and created by experts where you can start investing with just Rs.500.

Do you know? If you invest  ₹1,000 every month through SIP, for 15 years, with an expected rate of return of 14% p.a.*, then you can accumulate ₹6.12 lakhs! Isn’t that exciting? 

• Rupee Cost Averaging

Investing in SIPs on a regular basis allows you to take advantage of Market Volatility while removing the need to time the market. When we invest, we usually aim to buy Low and Sell high (in order to earn profit). SIP is the best way to invest as you can’t time the market. 

This approach is called rupee cost averaging, it helps you buy more units when prices are low and fewer units when prices are high, balancing out the risks. Now let’s have a look at how it works,

Example: Investing through SIP

Kanika is a disciplined SIP investor and she invests ₹ 1000 monthly. Given below are her investments and the no. of units purchased by her for 5 months – 

Total no. of units – 51.58

Average Cost of Investment – ₹97.78 (5000/51.58)

Total Value of Investments at May – ₹5,624.8 (51.58*110)

Investing through Lump sum

Anita has received a bonus at work and decides to invest ₹ 5000 via Lump sum. Given below is her investment and the no. of units purchased by her for 5 months 

No. of units – 50

Average Cost of Investment – ₹100 (5000/50)

Total Value of Investments at May – ₹5,500 (50*110)

As we can see from the example above, Kanika was able to purchase more units as compared to Anita in the same time period and as a result, her invested value was higher. Her average cost of investment was also lower than Anita. This is rupee cost averaging in SIP. 

• Build a habit of disciplined saving

We all know how our life gets busy with bills, shopping, and unexpected expenses. However, with an SIP, your investment happens automatically every month. This builds the habit of disciplined saving without you even having to think about it.

Over time, this habit can help you achieve big goals like creating an emergency fund, buying a home, planning your dream vacation, or simply creating wealth. 

• How to start investing through REPOLA

You just need an REPOLA Investment Account which is free to open and takes just 5 minutes if you are KYC verified. If you are not KYC verified our team will help you in the same, just comment “KYC Assistance” Contact or click here and we’ll get back to you on the same.

Once you open the REPOLA Investment Account, then you are ready to start investing in any REPOLA portfolios & start your financial journey.

• FAQs

How does SIP help in wealth creation over the long term?

SIP aids in wealth creation over the long term with a combination of the power of compounding and rupee cost averaging. With small, regular investments, your money grows into wealth. It also reduces the risk of market volatility, ensuring consistent growth over time.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.