Wednesday, 28 October 2015

SIP In Mutual Funds Is A Wise Investment Decision

SIP mutual funds are smart choice, any day. It helps inculcate a financial discipline and helps you put investments on your priority list. This particular investment plan gives you the benefit of averaging out your cost of investment thereby reducing your risk. For example, you invest Rs. 1000 every month and let us assume that the scheme you invested in, is available at a unit value of Rs. 20 per unit. Then in month 1, you will be able to obtain 50 units. In month 2, if the unit value goes down to Rs. 10 then you will be able to obtain 100 units. Hence for Rs. 2000 invested over 2 months, the total value of your investment at the end of 2 months is Rs. 1500. However, if you had invested a straight sum of Rs. 2000 in month 1 when the unit value was Rs. 20 per unit – your net value at the end of month 2 would have been only be Rs. 1000. So, a SIP scheme helps you average out your cost and thereby reduces risk resulting in generating better returns and compounding your wealth.

SIP has given all middle class a success formula, which is Start Early + Invest Regularly = Create Wealth. Since systematic investing has a compounding effect on your investments, in the long term, an investment as low as Rs 1000/- per month can swell up into a huge corpus. Similarly, starting your investments early also has its own advantages. Starting early means that the power of compounding starts acting on your money earlier, thereby potentially generating better returns. Now, as you decide to start with SIP, the purchase can be initiated on any day of the month where the actual purchase date can be 1, 7, 10, 15, 20, 28 of every month. But it is always advised to go with the last dates of the month because by then, you must have met out all your necessary expenses.

No comments:

Post a Comment