Investment in mutual funds can be done through two ways. Lump sum or through the systematic investment plan (SIP) mode. Under lump sum mode, you have to invest money in one go. In case of SIP mode, you can invest on a weekly, monthly or quarterly basis. Investing through SIP is the best way to invest in mutual funds, as it allows you to invest in a disciplined manner.
SIPs enable you to invest a smaller amount of money in mutual funds for the long term. You can start a SIP in mutual funds with just Rs 500. This reduces the burden of investing with a lump sum. SIP is suitable for all kinds of people who want to invest in mutual funds to meet their financial goals.
SIPs gave great returns over the ling term. For instance, if you invest Rs 2000 a month in an SIP of a mutual fund scheme, over a period of 20 years assuming an interest rate of 15% per annum, your money would grow to approximately Rs 30 lakh. So over the long-term SIP can give you good returns.
Almost everyone has financial goals such as buying a car, going on a foreign trip and buying own house. To meet these financial goals, you must have good financial planning. You can meet your financial goals effectively by enrolling for SIPs. You can invest your money in the desired mutual funds.
The date of periodic investment can be easily changed by just informing fund houses through the designated forms. If the investor wants to change the date of auto deduction from his savings bank account, he can do it by signing and submitting the Electronic Clearing Service form with the AMC.
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Investing in a mutual fund through SIPs, makes you financially disciplined by forcing you to invest regularly. Mutual funds help you meet your long-term and short-term financial goals.
SIPs enable rupee-cost averaging
Most of the time, SIPs are better than lump sum investments because of rupee cost averaging. Under this method, you can buy more units when prices are low and buy less units when prices are high.