Many times we have heard that markets have given good returns but investor’s portfolio has not gained. Lack of discipline is a primary factor in this.Product Returns – Investment Returns = Discipline
Start Small
SIP allows you to start with a small amount. An investor can start with as low as Rs. 100 a month.
Rupee Cost Averaging
From time to time markets suffer from bouts of volatility.Stock prices correct and as a result Mutual Fund NAV’s also come down.SIP allows an investor to gather more units at lower NAV’s.
Power of Compounding
Compounding is the 8th wonder of the world.An investor who does an SIP for the long term gets the benefit of compounding.
Ease of Investing
Along with smaller amounts SIP also offers an easy way to invest. Entire process of investing can be done online.
Past Track Record
Although past track record does not guarantee future returns but investors have the comfort of checking past track record of the portfolio manager and scheme before starting the SIP.
No need to time the market
Investors try to time the market and this is the biggest problem why investors fail to make money.SIP removes this factor as it involves a disciplined fixed amount investmentTime spent in the market is more important than timing the market.
Goal Planning
Goal Planning is what every investor should follow. Whether it is their own retirement or child’s education or any other goal.SIP can be used for financial goal planning by doing separate SIPs for different goals.
Diversification
SIP offers diversification. With a small amount an investor is able to diversify across multiple companies.A Rs. 1000 SIP gets invested across 20-80 companies which is not possible while buying stocks.
Asset Allocation
One of the important pillars of sound financial planning is Asset Allocation.SIP allows to invest in different asset classes thus ensuring that investor’s portfolio remains protected during volatile times.