Find information on Systematic Investment Plan
You reach your financial goals of own a house or kids education or kids marriage or retirement then you need to invest. Saving through traditional saving instruments is not enough you need to invest to reach your goals.
Mutual funds are a good tool for investment. You can invest in mutual funds through Systematic Investment Plan (SIP). SIP allows you to invest a fixed sum regularly in mutual funds. You can invest small amount of money regularly in mutual funds over a period of time to reach your goals. You can invest quarterly or monthly.
Investing on a pre-set date every month lets you keep aside some money to invest and gradually you become a disciplined investor. SIP supports power of compounding. In compounding the initial amount generates interest as well the previously earned interest. The longer you stay invested the more the benefits of compounding.
Advantages of SIP
There are many advantages of investing through SIP. They are as follows:
- As you invest regularly you do not have to time the market. The long term investments are not affected by market volatilities.
- As you invest a fixed amount regularly you can buy more units when the market is low and less when the market is high. This brings down the average cost of acquisition of units. It is called Rupee Cost Averaging.
- It is a smarter option when you want to invest for long term as your investments can turn into future wealth creating investments which is better than keeping the funds idle in the bank.
SIP is a smart tool. It allows you to breakdown your big goal into small amount. You can invest small amount through SIP in mutual funds to reach your big goal. You can select the frequency of investment based on your convenience and need.
Things to do before investing
You need to do the following before you start investing. First you have to identify your financial goal. Once the goal is set you have to decide your risk taking ability. Then you have to decide for how long you want to invest. After all this is done you need to find the mutual fund products that suit your needs. You should invest in 3 - 5 funds. You should diversify your investments into equity, debt and gold. You should know how much to invest across these assets to diversify your investments.
If all this gets difficult you can consult a financial advisor.
