SIP lets you invest a fixed sum in a mutual fund at regular intervals. This can be monthly or quarterly as per your capabilities. It inculcates financial discipline, especially in young adults, and ensures sufficient wealth for the future. Build a corpus via a systematic investment plan without worrying about market dynamics. Begin with as low as ₹500 and use the top-up facility to increase this amount from time to time in line with your income.
SIP is growing in popularity after the COVID-19 scenario since people have recognised the importance of investing money wisely after the drastic change in the global economy. There are ample benefits of starting a SIP early. You can stand to benefit in the long run via the following different ways.
Power of Compounding
The benefits are magnified since the profits are reinvested in the market. You earn returns on both your principal amount (initial investment) and on the gains of the principal amount. So, saving even a small sum can have an exponential impact on the investment due to the effect of compounding with time. So, try to start a regular investment and spread it over a long duration which makes it easier to achieve your goals. Use an SIP calculator to find the return value of the mutual fund investment.
Rupee Cost Averaging
The average purchase cost gets evened out if you start early. Get more units when the NAV is less or the market moves down and fewer units when NAV is high or it moves up. One can easily take advantage of the volatility which minimises the risk factor and ensures you acquire an investment at a lower average cost per unit. Make the best of a mutual fund SIP calculator to know the average return and see if it aligns with your goals.
Habit of Investing
SIP is a disciplined and routine approach. Starting early and staying invested for the longest time can help you become more regular and ensure ‘forced saving’ without hampering your lifestyle. It is especially helpful for the Gen Z or millennials who may have trouble saving money without distractions. You are more focused and thus tick off both long-term and short-term goals seamlessly. Always use a lump sum SIP calculator and factor in inflation rates to come to a practical and realistic return.
Lowers the Risk
A big investment in a market cycle can expose you to greater capital risk. Starting early lets you park a small amount and still achieve your desired goals over a long tenure. You are able to navigate volatility better with a low risk profile. This is quite beneficial for anyone who does not have a huge saving or are new to the investment landscape.
An SIP return calculator helps you invest the right amount to tick off your financial needs in the future. It is free of cost, quick, accurate and convenient. You do not require any prior knowledge to use it. Try to start as early as 25 years and reap the benefits in future.