Financial managers recommend investment instruments based on the financial goals and the risk appetite of their clients. There are numerous investment vehicles available in the market, the most common one being a Systematic Investment Plan.
Understanding Systematic Investment Plans
As the name suggests, Systematic Investment Plans (SIPs) help individuals to save a fixed amount at regular intervals, say monthly, quarterly, half-yearly, or yearly. It is a popular investment option that helps you earn good returns over a period of time. The invested amount is used to allocate a certain number of units according to the ongoing Net Asset Value (NAV). With every additional investment being made, certain units are added to the investor’s account.
Financial managers advise their clients to hold SIPs for a longer time frame. Investing for a longer term offers numerous benefits to the investors.
Following are five major advantages of long-term investment.
- Enjoy healthy returns
It is general knowledge that higher the investment horizon, higher will be the returns. A Systematic Investment Plan offers the potential to build a healthy corpus over a period of time. By investing small amounts at regular intervals, you may generate wealth in a systematic and effective manner.
- Beats volatility effectively
The stock market is prone to volatility. With increased fluctuations, chances of incurring a loss during a bearish market cannot be eliminated. In order to avoid being affected by the highs and lows of the stock market, you may consider long-term SIP investment. Through its steady track performance over a period of time, you may even out the risk factor effectively.
- Meet life goals easily
Every individual has their own set of life goals. While some may wish to save for their children’s education, some may seek to build an emergency fund. Some may invest in order to meet marriage expenses, build a new home, or to plan for retirement. Investing in a SIP helps you accumulate a sufficient corpus to meet such financial goals.
- Enjoy the power of compounding
A major benefit of long-term investment is the ability to enjoy the power of compounding. The interest amount earned from your investment may be reinvested again to generate additional earnings. Through this snowball effect, you may enjoy higher returns and save a substantial sum.
- Become a disciplined investor
The main virtue of a mutual fund SIP is the ability to inculcate discipline. It infuses a habit of regular savings. You learn to save a certain amount every month. You may also opt to increase or decrease the amount based on cash inflow or outflow. Additionally, you may halt investments at any point in time in case of an emergency. This provides a high degree of flexibility. The image below shows the infographic
Investing in SIP, Advantages SIP compared to LumpSum
A Systematic Investment Plan is indeed a convenient and efficient tool to build wealth over a period of time. You may avail of the aforementioned benefits and invest in a SIP at the earliest, thereby building a strong financial future.
A systematic investment plan is a financial invest offered by various mutual funds, allowing investors to invest small sums of money each month rather than large sums at regular intervals.
Why long term investment need to be? If short term investing is about capital preservation, As the same long term investment is about wealth creation. Long-term investing plans means accepting a certain amount of risk in the pursuit of higher rewards.
Long Term Investment Guide:
1. Stocks
2. Long Term Bonds
3. Mutual Fund
4. Real estate
5. Robo- advisors
The article is very well written and very informative. Long term SIPs ensure long term capital appreciation and wealth generation and is suitable for investors looking for the same result.. One should make sure proper planning is done before starting the investment procedure.
Sir, I am investing 2000 per month in this funds. What is your advice on it. should I continue with them. The goal is 25 lakh in 10 years from now. Thank you.
1. Reliance Value Fund old name – Reliance regular savings growth equity 2. Birla Sun Life front line equity 3. DSP Black rock top 100 4. SBI bluechip fund growth direct