When it comes to the question of choosing an appropriate mutual fund strategy every investor happens to be in a dilemma. The main question in front of them is whether to invest in a lump sum amount or to follow a SIP investment calculator module. Both these mutual fund strategies do have their own set of pros along with cons, for a novice investor the benefit of SIP investments cannot be overstated. Below are a few pointers that you need to keep in mind when you are investing in SIP and the benefits that you can accrue from the same.
SIP allows an investor to invest a specific sum of money in a systematic manner. A common form of SIP is monthly SIP where a pre-determined sum of money is invested based on your choice. Take note of the fact that the SIP amount is fixed as the NAV is going to vary on a daily basis. The benefits of SIP are as follows
Averaging of rupee cost
It is a concept where you go on to purchase a higher number of units when the NAV value of a fund is low and it is going to be high if the number of units is low. What it means is that the cost of purchasing the mutual fund tends to average during the life span of the fund. There is no need to worry about the time if you are investing through SIP as it turns out to be a key benefit associated with SIP.
Power of compounding
Compounding means that the investments that you have made start to yield returns. Though it happens to be a similar concept the implications turn out to be substantial. You can re-invest the regular investments made through the SIP. With the passage of time, the results may turn out to be a snowball effect that is going to increase the potential return several times. This is one of the benefits of SIP as you can invest as early as possible.
A flexible method of investing
One of the features of SIP is that you can choose to invest with a sum as low as Rs 500 on a daily basis. This is an affordable way of investing without hurting your wallet in any way. If there is a rise in your earnings you can go on to increase the number of earnings that you put in these funds. This is how SIP investment funds can enable you to reach your goals a lot faster.
A convenient method of investment
The best part about SIP is that it turns out to be a convenient method of investing. Even if you are not going to find a sufficient amount of time to do research and analysis SIP is something that would happen on its own. So you need to choose a fund and the best platform that can help you is 5paisa. They help you and give out standing instructions to the bank. They would be taking care of the rest.