
Benjamin Franklin said – “Time is money.” Truer words have never been spoken!
Getting that OTT subscription, buying those concert tickets, shopping online—the common thread connecting these analogies is that you would spend on these expenses without a second thought. So why would you put off investing in your future security while waiting for a higher income or the ‘right time’?
When it comes to financial growth, the right time is now. In fact, the earlier you start, the better. For every novice investor faced with the dilemma of making a lumpsum investment, that is not the only option. When you start investing on Stack’D, you can set aside a small amount of money and watch it grow slowly and steadily, thanks to Systematic Investment Plans (SIPs).
SIPs offer a simple yet powerful way to build your wealth over time. They enable investors to invest a fixed sum of money in a fund scheme at predefined intervals, which can be monthly, quarterly or annually. This form of investment supports a structured investing approach, fostering financial discipline and yielding significant returns over a long time.
Benefits of starting your SIP today
Note that while the SIP amount is fixed, the net asset value (NAV) of mutual fund units varies on a daily basis. Here’s why you should take the plunge and start your SIP journey today –
- Power Of Compounding – Compounding is like planting a seed; the earlier you plant it, the more time it gets to grow. Investing is the same – when you invest in your 20s, your wealth gets a good headstart to earn returns and multiply. With regular investments through SIPs, your returns can again be reinvested, resulting in exponential growth.
- Rupee Cost Averaging – Inspired by Dollar Cost Averaging, the principle of Rupee Cost Averaging allows you to purchase a higher number of units when a fund’s NAV is low and a lesser number of units when the NAV is high, reducing the impact of market volatility. This benefit of SIP ensures the cost of purchasing mutual fund units averages out the SIP’s tenure. An ideal way to maximize your gains is to invest for an extended period.
- Flexible Investment Amount – When investing in SIPs, you have the liberty to choose the amount you want to invest. It doesn’t have to pinch your pocket. You can start with just Rs. 500 every month. Some mutual fund companies have even reduced the minimum Daily Systematic Investment Plan amount to Rs. 100. SIPs are affordable to investors with varied budgets.
- Convenience And Flexibility – SIPs are hassle-free, automated, and can be tailored based on your goals and budget. You can also easily modify the SIP amount, pause it, or stop it at any time, giving you complete control over your investments.
- Diversification – You don’t have to put all your eggs in one basket. There is no limit to the number of SIPs or mutual funds you can invest in at the same time. You can invest in different mutual fund schemes.
- Financial Discipline – When you start investing at an early age, it makes you more financially disciplined. This means you are developing a habit of saving money and are better placed to make your money grow. The fact that SIPs are automated ensures you put aside some money every month, even if your income fluctuates.
Your 20s are a golden decade to invest in dreams, security, and freedom. It is also the best time to work towards financial independence and start an SIP. Wondering why? Because your financial responsibilities are fewer compared to later stages, and waiting will only make your goals more expensive.
Utilize this phase to create a strong financial foundation. The earlier you start, the bigger the rewards. Taking small, consistent steps to build your wealth is the key.
Disclaimer: Mutual Funds investments are subject to market risk. Please read all the scheme-related documents carefully.
Frequently Asked Questions –
- How does SIP work?
Setting up your SIP mandate is an easy process.
- Do your research on mutual fund schemes and choose one that aligns with your long-term financial goals and risk tolerance.
- Fill out a form and provide the personal information and bank details required for automatic deductions.
- Decide the amount you want to invest every month, which will be automatically deducted from your bank account and invested in the chosen mutual fund.
- You can also track your mutual funds investments through the Stack’D app or through the fund’s website.
- What is the difference between SIPs and lumpsum investments?
SIPs and lumpsum investments are two different approaches to investing in mutual funds.
SIPs constitute investing a small fixed amount into a mutual fund. The investment amount and frequency can be changed over time, but the investment duration remains fixed. SIPs play a key role in instilling financial discipline and saving habits with long-term investments.
Lumpsum investments, on the other hand, require a one-time investment of a large sum of money into a mutual fund. This type of investment is ideal for individuals who have a large sum of money available or those who want to invest in one go. While a lumpsum investment has the potential to yield higher returns, there is also a higher risk associated with it, as it is subject to market fluctuations.
- Things to consider before investing in SIPs?
It is essential to do your research before you start investing to ensure you make the right financial decision. Here are a few things to consider before you invest in SIPs:
- Establish your investment goals in advance. Whether it is funding education, buying a home, or planning your retirement, list down your financial goals.
- Different mutual funds have varying risks and returns. Determine your risk appetite accordingly. For instance, Equity funds are riskier but yield higher returns, whereas conservative funds like debt funds are more stable with moderate returns.
- Since SIPs are affordable and flexible, you can determine your investment amount without compromising your financial stability. You can even increase that amount based on a rise in your earnings.
- The expense ratio is the annual fee that mutual funds charge for managing your investments. Therefore, before you opt for a mutual fund, it is wise to consider the expense ratio, as high fees can often eat into your returns.
- Beware of taxation on mutual funds. The tax liability on mutual fund investments varied depending on its type and duration. It is advisable to consult a financial advisor or tax professional to understand the best approach.