Five Ways How SIP Can Give Your Profile an Overall Boost?

Mutual funds have become a preferred investment choice for all investors because of their high potential to create wealth in the long term. If you invest wisely in a carefully chosen scheme as per your risk tolerance, you can achieve your financial goals, such as buying a house or car, starting a business, funding the education of your children, traveling, etc. Apart from giving you the flexibility to invest as per your risk tolerance and financial goals, mutual funds give you financial ease. You can invest in mutual funds via SIP (Systematic Investment Plan), where you contribute a specific sum at a pre-agreed frequency for a fixed duration. There are multiple advantages of investing through the SIP mode.

Here are five ways how a SIP can boost your overall mutual fund profile:

  1. Power of compounding:One of the greatest advantages of investing in mutual funds through SIP is the power of compounding. Compounding allows you to earn interest on your principal, as well as the accumulated interest, enhancing your mutual fund corpus significantly. As you stay consistent with your SIPs over a long time, the interest snowballs into a hefty corpus, owing to the power of compounding.
  2. Rupee cost averaging:The SIP method in mutual funds works on the principle of rupee cost averaging, giving your profile a much-needed boost. Market volatility is an inherited part of mutual funds, especially equity mutual funds. Hence, timing plays a critical role. If you buy low and sell high, you can generate high returns. But it is challenging to time the market. However, when you make distributed contributions across market cycles and conditions through the SIP mode, you average the cost of buying mutual fund units. This helps you mitigate market volatility to some extent; as a result, your mutual fund gains increase.
  3. Disciplined investing: SIPs require you to invest a pre-agreed amount for a specific duration. You can begin mutual fund SIPs with an amount as low as Rs. 500. With such low investment, staying consistent in mutual fund contributions is easy. This inculcates the habit of saving and disciplined investing from an early age. Further, with the auto-debit feature of SIPs, the amount is deducted from your bank account hassle-free, ensuring you meet your savings goals.
  4. The flexibility of investment:SIPs give you complete investment flexibility that can help boost your mutual funds. There are different types of SIPs available in India, such as trigger SIP, top-up SIP, flexible SIP, perpetual SIP, etc. If you invest through the top-up SIP, you can increase your SIPs at regular intervals. So, if you started with Rs. 1,000 per month, you can ask the fund manager to boost your SIP with Rs. 1,000 after every six months. This allows you to benefit from the power of compounding more effectively.
  5. Better investment planning:You can start a SIP aligned with your financial goal. Regular investments help you to plan your finances and budget better to save more. Auto-deduct investments are conducive for better returns, eliminating the need to track the market. For instance, if you want to start a SIP for buying a home ten years from now, SIP will ensure you stay focused on your goal and save consistently to ultimately achieve your target.

Use the Tata Capital Moneyfy app to begin your SIP investments now. However, be careful when investing and use the Moneyfy app to compare mutual funds and choose one that best matches your needs and risk appetite.