This is an easy approach for building wealth over time by investing consistently at regular intervals in mutual fund schemes. It is similar to the idea of recurring deposit schemes, but because it involves equity, it carries a higher risk and greater potential reward.

What is Systematic Investment Plan?

When an investor commits to investing a certain amount over an extended period of time at regular intervals, he ensures that he will benefit from lower prices by purchasing more units and higher prices by purchasing fewer units. This is based on the rupee cost averaging principle and allows the investor to automatically ride the market’s ups and downs.

Advantages of Systematic Investment Plan:

The compounding effect, A delayed investment will result in a greater financial burden to meet the required goals; at an early stage, a less investment is needed, whereas more investment is needed at a later stage to accumulate the same planned corpus. To take advantage of the power of compounding, one must start early and invest regularly.

Rupee-Cost averaging:

This refers to averaging your investments’ cost basis.
Due to regular monthly investments of an equal amount at various NAVs, SIP aids in cost averaging. SIP functions effectively in a turbulent market since you receive more units during months when the market is down because the NAV is lower, and fewer units during months when the market is up because the NAV is higher. However, the prices are averaged across the board.
Let’s examine how: Let’s say you invest your initial Rs 1,000 at a NAV of Rs 10. In this instance, 100 units will be purchased (1,001/10). You invest your next Rs. 1,000 at a NAV of Rs. 12. 83.33333 units will be purchased at this time (1,000/12). Assume now that you spend a third time in the amount of Rs 1,000 at a NAV of Rs 9, in which case the number of units you would get will be 111.1111 (1,000/9).
The average purchase cost works out to Rs 10.19 (3,000/294.4444).

Convenience:

It is very simple to start a SIP; all you need to do is set aside some money each month for investing in funds, either through post-dated checks or through ECS instructions in a particular fund house scheme. It is always best to start young with a small amount and gradually increase it over time. A Systematic Investment Plan (SIP) is a smart way to achieve your various financial goals and ensures you with the required corpus which was initially planned for the specific requirement. If you haven’t started investing yet, do so right away because waiting for the right time to invest can result in missed opportunities.

Only when you pick the best investment strategies and remain steadfast and committed to them without deviating will you benefit from SIP.

Investment through a systematic periodic payment plan in a well-diversified, high-performing scheme that can help you reach long-term objectives like retirement, marriage, and the education of your children financially.

At a 15% annual return, an investment of Rs. 2000 made over the course of 15 years will provide you Rs. 12,32,731 at the conclusion of the period. (solution for your child education).

At the conclusion of the 20th year, an investment of Rs. 3768 each month for the following 20 years at a 15% annual return will be worth Rs. 50 lakhs. This might be the answer to your retirement problems.