SIP - The magical recipe for financial success

SIP, Systematic Investment Plan, Mutual Funds, Wealth Creation
Building wealth is about the smarter process of multiplying your savings and not stocking up cash inside a locker or trying to maintain a positive balance in a savings account.

You must have heard of SIP - It is your friend. Infact, best friend!!

Systematic Investment Plan (SIP)

Systematic Investment Plan (SIP) helps you to invest small amount, as less than 1000 rupees a month which will help you to build long term wealth. Continuous investment every month helps you to get great returns despite market uncertainties. Few great advantages of SIP's -

Easy To Setup - Once you have got the KYC done, all it takes is few clicks to setup your SIP. And the best part is you don't have to remember the dates to make the payment. If you have a net banking account, get an iSIP registered from the mutual fund website to avail the benefit of Direct mutual funds which have low expense ratio. If you are thinking of long term investment, investing in direct funds is always a better idea than through regular mutual funds.

Gives Flexibility - You can choose to invest the amount, based on your financial health and it can be changed anytime. A good practice is to grow the SIP amount each year in proportion to your increased income. There is no lock in period for SIP, like recurring deposits. But you must know the exit load before investing in a scheme. An ELSS has a lock on three year, whereas most other equity schemes have an exit load of 1% before one year. Make sure you are aware of these details.

Power of compounding - The biggest advantage of SIP's is the power of compounding it offers, it is much higher than a Recurring Deposit. With mutual funds, compounding works every single day, unlike your bank deposits, where interest is compounded monthly (RDs) or quarterly (FDs).

Rupee-cost averaging – SIPs allow you to invest in the ups and downs of the market. Since you get to invest across various market phases, you buy more units when the market is down and fewer units when the markets peak. In other words, you actually get to do some bargain hunting automatically! And you do this without the risk of having to time the market. But remember, for averaging to work, you will need to invest over long periods of time. Only then will you buy on dips.

Mutual funds as an investment instrument has been gaining popularity over the years, thanks to the wide range of options available and the ease of KYC process. To know more about them, check out The Mutual Funds Sahi Hai campaign, launched by The Association of Mutual Funds in India (AMFI) at

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