Systematic Investment Plans – Five Ultimate Benefits

Systematic Investment Plans

Investment is necessary. It does not matter if you have a steady source of income or not, investing and investing right is the way to achieve financial freedom and independence. Systematic Investment Plans provide you an opportunity to build a long term wealth creation mechanism for yourself and your family.

Systematic Investment Plans or commonly called as SIPs, lets you start investing from a small amount, hence making it possible for every strata of society to start building wealth according to their own means, thereby reducing burden to keep thinking and planning exclusively, which is not possible for a majority of people who are not aware of the nitty-gritty of finance and investments.

Here are the five core benefits you reap with an SIP.

1. Convenience

Systematic investment plans are convenient to start with. You can start investing as low as Rs. 500 per month, and you do not need to visit banks or financial institutions. You can start an SIP online sitting over your laptop or mobile. It is as good as starting a Recurring Deposit with a bank as we used to do earlier, minus the documentations hiccups and time to visit and deposit in your account every month.

2. Every Drop Counts

SIP does not demands you to invest bigger amount of money, plus, you can invest as much as you have got in spare. If you are struggling with cash crunch, a good idea is to start with bare minimum amount, and top it up with whatever extra you could invest. This would help you build a corpus without hitting hard on your monthly budget, and at the end you would realize that you have build a good amount of money with small droplets. How, see next point.

3. Compounding benefit

The power of compounding is known to everyone. An amount of 100 at the rate of 8% simple interest takes approximately 11 years to double, whereas same principal amount at 8% compound interest doubles in 8 years! Isn’t it amazing? Your investments also grows at a compound interest. The key is to start as early as possible. In the present world of economic instability, as soon as you start earning, you must aim to start investing in an SIP a minimum amount at least, and you would realize you are accumulating worth.

4. Averaging out market ups and downs

The financial market is volatile with values moving up and down frequently for chosen investment patterns. SIP helps you average out your gains and losses, thereby reaping a good return on an average. Unlike shares where you decide where to invest with higher risks or returns attributable to your own information, the funds in SIPs are invested by fund managers who are day in and out watching the market trends and working for your funds so that you get maximum return in your investment.

5. Tax Savings

You can save tax by systematically investing in ELSS (Equity Linked Savings Scheme). Though, there is a lock in period, usually 3 years in an ELSS, but you can reap benefits under 80C, hence giving you two fold benefits of investment and tax savings.

SIPs are the way to go if you intend to use a long term wealth creation formula. Even if you are not intending to invest much, I strongly suggest starting an SIP and putting your unused funds in the same, as it would definitely start mobilizing your unused funds and you start gaining.

So what are you waiting for? Start now with your investments, and do write in comments your formula of creating wealth with SIPs.

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Written by Jyoti Sharma

An ex financial markets professional; mathematics, abacus, brain gym trainer and a hobbyist blogger.


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