SIP or Systematic Investment Plan is one of the most profitable and convenient ways to invest a fixed amount on a monthly, quarterly, bi-annually, or annual basis to get maximum returns. These investments are further directed towards mutual funds that have been particularly selected by the investor, which enables him to earn consistent returns on investments made.

This is a pre-planned and systematic investment that can be customized as per the personal requirements of the stakeholder and can be assessed using a sip calculator. It does have a degree of risk attached to it, but the more the risk, the higher the returns. Because of its high rate of returns, SIP has become a favorite investment option for many in India.

Benefits of SIPs:

  1. Compounding Interest Benefits:

Compounding interest means interest earned on the interest already received. When an investment is made early in life, the funds get a longer time to mature and earn higher returns than other investments. Aggressive returns can be expected from long-term SIPs, all due to compounding interest.

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  1. Rupee-Cost Averaging Benefit:

Since you would be investing funds in SIPs over a long period, the benefit of balancing any losses arising out of fluctuations of the market, inflation, and volatility is noteworthy. The amount is invested in mutual funds, and thus a greater number of units can be purchased when the price falls and when the price rises, the number of units purchased can be mitigated. You can measure the same using a sip interest calculator. This creates a balance and further reduces the average cost, giving you the rupee-cost averaging benefit.

  1. Systematic Savings Benefit:

Investing in SIPs develops a good habit of making systematic savings and investments, and thus, it encourages you to indulge in disciplined investments. The frequency at which money is invested, the automatic transfer facility, and the expectation of a high return can further motivate and encourage you to invest even more.

  1. Flexibility and adjusting with Volatility Benefit:

SIP investments are highly flexible as far as the amount invested is concerned (which can be reduced or increased in the long run). The payment cycle can be modified, and you can choose to withdraw or discontinue the SIP anytime you want. SIPs also take volatility and inflation into consideration and prepare funds balanced according to the tenure of the investment.

  1. Long-Term Returns Benefit:

This will give you the benefit of considering long-term goals and objectives. SIP, once invested, should be kept for a long time, and you should be regular with your contribution, increasing it from time to time. The longer the term of the SIP, the higher benefits can be reaped for meeting specific financial goals. You can use an online sip calculator to find out the estimated returns based on your investment.

  1. Convenience:

To make investments in SIP is easy and does not require much documentation. There is no need for you to have a thorough knowledge of the stock market as your funds will be managed and invested by a professional. The investor can set the period after which the funds will be automatically debited from your account. So, it is a fairly simple and convenient process that will be beneficial for all.

  1. SIPs are quite affordable:

One can invest a lowly sum of Rs. 500 per month in a SIP, and so it is quite an affordable option for the average earning individual. Even a student can invest in SIPs and save his pocket money to earn a higher level of return, thus enhancing his investments in the long run. You can check a consistent growth pattern by using an effective online sip interest calculator.

  1. Innovative SIPs

SIPs are not of a single category but offer many options of investments like the NAV limits, daily, weekly, fortnightly, quarterly, monthly, annual investments, direct bank debits, and much more. These provide a wide range of options to invest in as per your saving and income capacity.

  1. Tax benefits

Taxes on SIPs depend on what kinds of funds are invested in – equity or non-equity. Most SIPs are based on equity funds, and capital gains up to Rs. 1 lakh are exempted, and the remaining amount will be taxed at 10% as per the taxation rules on equity funds. If the amount is redeemed in less than one year, then the taxation will be at 15%, and no exemption on tax will be provided.

Conclusion

A Systematic Investment Plan is a highly convenient investment strategy that is all about putting small amounts of money or income into mutual funds (of your own choice). It is an ideal option for the salaried section of the population or the middle-class worker who gets a fixed payment per month and who wants to make a high-value investment for his future needs.

If you want to know more about SIPs and how to calculate the investment amount to meet your goal, click here