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Benefits of Investing in Mutual funds Through SIP

Rupee cost averaging

• The mechanism of SIPs follows the principle of rupee cost averaging. This is because it requires you to invest a pre-designated amount in a mutual fund of your choice, typically every month.
• This regular investment in an efficient mutual fund allows an investor to accumulate wealth over time. When markets are down, the NAV of a fund falls thus allowing an investor to accumulate more units of the fund.
• On the other hand, when markets rise, the NAV rises with it thereby reducing the number of units accumulated. In this way, the per-unit cost of holding the fund averages out over a period of time and that is why the principle is known as rupee cost averaging.

Power of compounding

• This is a related benefit to rupee cost averaging. Some investors wait to begin their investments as they don’t want to start with small amounts. But taking small but consistent steps early is the key to growing your wealth.
• Because apart from averaging out your cost of investment and accumulating large number of mutual fund units, your invested money gets a chance to grow manifold because of the power of compounding.
• This benefit hinges upon your overall investment duration: the earlier you invest, the more you let the power of compounding work. Start early, even with a small investment, because you can always increase your investment as your salary or other income sources grow.

Instill investment discipline

• SIPs make your investment disciplined; by simply signing up for an SIP, you are forced to set aside your chosen SIP amount on a periodic basis thus instilling discipline which is crucial to ensuring that your money gets the best chance to grow.
• Once you start seeing how your corpus is growing through the years, you can truly appreciate the power of SIPs

Significance of goal based investing

When you decide to take the financial market route to grow your wealth, there are certain things that you need to consider. One of them is to have goals that you intend to achieve and milestones within those goals. These goals can be divided into short and long term goals.

Short term goals can include buying a two or four wheeler, travelling abroad, redesigning or repainting the house, replacing old equipment, machines, and furniture, among others. Meanwhile, long term goals can include buying real estate, paying for a child’s education and marriage, buying a second property, investing in a business, among others.

Having these goals and informing your wealth manager or investment adviser about them is crucial for you to help them draw an appropriate investment plan. Investing without goals is like driving a rudderless ship: it will keep shifting direction but will never reach anywhere. After finalizing an investment plan, you or your money manager can use SIPs to help you achieve those goals efficiently.

Benefits of Mutual Fund SIP Return Calculator

You may now have realized the importance of goal based investing and how SIPs can help you achieve your desired corpus. You may have devised a broad plan to achieve your aim, but how can you assess, in monetary terms, the corpus that you can accumulate after deciding your SIP amount for a certain tenure?

In order to help you do this, we have provides you with a ‘Target Amount SIP Calculator’ which helps you calculate the future value of your invested money by taking into account SIP for a specified period at the expected interest rate.

Use this, and give direction to your investment portfolio.