What Is SIP and How Does It Work?

We know what is the one common thing between a salaried person and also a businessman. They both will be investing in a Systematic Investment Plan you know what is the one common thing between the CEO and the employee who is in that last ladder of the company?

they both will be investing in a SIP plan despite the difference the huge amount of differences in CEO's salary and the other person's salary so why this SIP is so popular among everybody and there are so many call questions doubts or queries regarding this SIP as an investment approach.

So in this article, I'm going to explain to you that what are the convenience what are the advantages of investing in SIP, and most importantly how you can reach your financial dreams and goals if you are investing through SIP. so why people are going crazy and investing in SAP acid investments plants Okay here are the basic advantages of investing in SIP.

What are the conveniences?

Number 1

The number one convenience is there is no complication there is no contract with the investor when you sign up for SIP what I mean by contract is when you are buying a life insurance plan you are obligated to pay the premium for so many number of years or so many number of months but in SIP there is a no compulsion for you to continue with.

You can stop that SIP next month or next year or two years later. So that is the convenience it is offering it to you and there are no charges there are no fees involved even if you skip or even when you stop the SIP. 

Number 2

Number two convenience is SIP is like your bank account what do you do with your bank account let's say you have one lakh rupees in your bank account and you need one just 5000 rupees for some financial emergency means you will be traveling 5000 right the same kind of withdrawal you can do it at SIP also. 

So, whatever the corpus you created in SIP if you have any financial emergency or if you have any requirement you don't have to withdraw the entire money you can withdraw the money whatever you require for that particular requirement. 

Number 3

So the convenience number three is you can increase or you can decrease that SAP contribution at any point in time you signed up for 10,000 next month you wanted to reduce it to 5000 Please do that next to next month you wanted to increase to 15,000 you still do that or if you wanted to stop everything allow that fund to grow.

Still you can do that whatever the permutation combination of the options comes to your mind SIP gives the flexibility to operate like that and most importantly you can do everything at the click of a button sitting at your home that is the convenience of SIP. So, this SIP is something a new concept.

Because it offers so much of convenience advantages is something new, it is nothing new about SIP because you go anywhere in India every nook and corner in remote villages also people invest in recurring deposits the same concept which applies for SIP also. 

So a month on month so we used to invest in gold schemes we used to invest in cheap funds we used to invest in recurring deposit

it's the same concept which is called SIP. Okay, what are my personal favorites when it comes to SIP I consider this as a very powerful option solutions for investments. 

What are the advantages? 

#1. Number

The number one option which is SIP means you, invest somebody, with the discipline, for example, you know, what is your income? You know, what is your expenses but Most of the people what mistake they do is they actually spending money and whatever remained that they will save and invest.

That is definitely not a good option when it comes to SIP you sign up on SIP. the first two dates after your salary whenever the salary gets credited. So, when the income comes, you first invest and then you spend, so, you have complete discipline on your expenses and personal finance.

#2. Number

Number two, whenever it comes to the stock market, what people think is why people don't invest in stock market is they have three appear apprehensions they have three biggest challenges bottleneck when it comes to stock market number one, stock market is like a gambling very very volatile stock market is a highly risky stock market I can't time the stock market when to invest when to enter when to exit these are the three major blocks when it comes to investing in the stock market.

But SIP you know, there is something called rupee cost averaging when it comes to SAPs let's say the market is like a 53,000 Today you are investing 10,000 rupees and let's say in the next month the market goes to 50,000 and you will be still investing the 10,000 rupees right and that is the concept of SIP.

When you invest 10,000 rupees at 50000 means you will be buying more number of nav which is definitely beneficial for you. So, when the market goes down, you got benefit out of it okay let's say what happens when the market goes up okay the next month the market goes up from 53,000 to 55,000 .

That means you are investment got appreciate it you are getting additional returns for the whatever the investment you are still you are a beneficiary. So, please do not worry about the market volatility Please do not worry about the risk involved. Please do not worry about the timing of the market.

Whether Are you investing when the markets are high value investing with the market at 53,000 You don't have to bother whether the market goes up or whether the market goes down you still will be benefited that is called rupee cost averaging that is the second most important benefit of investing in SIP. 

#3. Number

The third is you can even start with the lowest amount of 100 rupees many people think that in when it comes to stock market investment, it requires a huge amount of money no it does not require a huge amount of money, even you can start with as low as 100 rupees. 

If you're reading this article, in a laptop or with a smartphone that means that you can afford a minimum of 500 rupees. So, keep that 500 As a minimum and if you have not started SIP, today is the day to start the SIP never missed to take the action please take action please start something.

Please don't be thinking that okay let my salary go from this level to next level let me start with rupees 5000. So, whatever is affordable as of today, please start it. So that's the third biggest advantage which is you can even start with the lowest affordable amount. 

#4. Number

So, the fourth biggest advantage is whenever you actually invest in any kind of investment that has to grow compound normally. So, when you invest in the SIP the money grows compound only that is the one of the biggest advantages Einstein says that the compounding effect is the eighth wonder. So, you will get the compounding effect that is the fourth biggest advantage. 

#5. Number

The fifth biggest advantage is it gives you a higher return needed to beat the inflation. What is the return you can expect from SIP or investing in mutual funds equity-related mutual funds you can fairly expect 12 percent of return if you are stayed invested in 7 years period. 

Of course, there are no returns are guaranteed in equity number one because markets mutual funds are subject to market risk. So the volatility is also very common even when you invest in SIP. Sometimes when you invest in SIPs, your investment price might go down or might go up. 

But if it is going down also please do not worry about it your rupee cost averaging your power of compounding will help you when the market recovers. When you investing regularly for a period of time of seven years, you will get a CAGR compounded annual growth rate of 12% and double if you're investing in a good and high-performing scheme.

The long-term average return from the equity market is 12%. Definitely, you can take home this return and compare this 12% return with all the asset classes. The number one asset class is fixed deposit how much-fixed deposit is offering 6% This is 12% Still it is better.

How much Gold is offering 7% This is still better how much life insurance or post office scheme can give 8% This is still better. And look at real estate options real estate requires a huge amount of money to be infused. And it is not liquid at all when you want to liquidate money, you will get the money back in three working days. 

So that is the convenience this mutual fund SIP is offering it to you high return high liquid and utmost with all the comfort of whatever I have discussed with you.  

You can invest on your own with nobody's help but I would be advising you that every investment is a personalized decision. The risk appetite, the return expectation, the goal, the duration, the horizon, everything needs to be analyzed and there will be a recommendation specialist to protect you.

If you are a student the recommendation would be different. If you are a 45-year-old person the recommendation would be different. If you are a 55-year-old person or a person retired or nearing retirement recommendations will be different for you.

So take the expert's help or connect with me I'll be helping you to choose the right kind of under for you. But take action and start your investments in SIP immediately