Why Is 5 Years The Best Time To Invest In SIPs?

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SIP is slowly becoming one of the best investment options for disposable income in many households. With just an internet connection and an amount of just five hundred rupees a month can make you eligible to invest into SIPs. Five year is often considered the optimum time to gain maximum from your SIP investment. It is seen in past that most of the mutual funds outperform their expected returns in the five-year period.

 

Systematic Investment Plans are the best investments giving high returns and are prone to market crash. They are being considered best options to achieve one's financial goals. When you buy direct stocks, you need to have high visibility of how a stock is performing against market however a mutual fund is managed by a fund manager through a diversified portfolio. You can always research about how a fund is performing and how others funds have performed in past for the said fund manager before giving out your money to invest into SIP.

 

Key things one should keep in mind to select best SIP Plan for 5 years --

  • Most of the mutual funds perform their best in five years lock-in period.
  • One should have a clear financial goal for the term of five year and returns should be calculated after adjusting the applicable risks.
  • Smart investment is done invest into equities linked SIPs.
  • Online arena helps you invest and manage your SIPs well within this period. You can see how your fund is progressing with time and the fixed amount is auto debited from your account every month.
  • The best SIP plan for 5 years is the plan that helps you achieve your financial goals. However this could be different for different people.
  • Mutual funds for SIP fall under various categories to instigate different financial goals.


Benefits of SIP --

  • Being a disciplined way of auto regular investment, it allows one to feel free and relaxed. 
  • You enjoy power of compounding. i.e., you not only your investment keeps increasing, inheriting a huge return but also brings you surplus funds at the end of locking period.
  • You get the benefits of averaging, i.e., in certain months you have high market hence you buy only few units based on its present NAV and in other months when the NAV is low, you buy more units of the fund, thus averaging the market impact on your investment.