What is an SIP?
Imagine being tasked with scaling Everest – the tallest mountain in the world. Do you think you will just be able to wake up one fine morning and climb to the top? No. Similarly, if you want to enjoy the fruits of your hard work later in life, you will need to start preparing and planning for it early, in a systematic and consistent manner.
Systematic Investment Plan, or SIP, offers one an opportunity to generate wealth, with a disciplined and systematic approach, to meet their financial goals. Much like preparing to scale for Everest.
SIP inculcates financial discipline and is a great tool for wealth creation to realise your financial goals.
It is a tool that offers you the option of investing in various mutual fund schemes at regular intervals and in lower amounts as well.
One can also chose to invest a fixed amount in mutual fund schemes on a monthly or quarterly basis.
You can reap good returns even by investing amounts as low as INR 500 per month.
Through SIP, one can invest in equity (stock market) or debt markets. It also gives one the convenience to invest in markets without getting worried about market volatility.
Returns offered by SIPs are more attractive than traditional tools such as fixed deposits. In terms of mechanism, SIP works like a recurring deposit scheme where one deposits a fixed amount every month. However, compared to recurring deposits where there is a fixed rate of return and a limited appreciation of investments, SIP offers a variable rate of return, with a higher potential to enhance capital.