SIP is merely a method of investing in mutual funds, and the underlying fund's risks remain the same. That is the reason it is prudent to invest as per your risk appetite.
You can pause and skip SIP payment: If for some reason you don’t have enough balance in your account for the SIP investment of a certain month, you can still continue with the SIP next time without any hassle. No penalty or charges will be levied.
You can increase SIP amount every year: With the rise in your income levels, you can gradually increase the quantum of your investment in SIPs.
Financial discipline: Investing consistently before spending inculcates a habit of financial discipline. It is recommended to fix your SIP date right after your salary day to ensure that your investments are not compromised because of your discretionary expenses.
Market fluctuations won't bother you: SIPs are based on the principal of rupee cost averaging. When markets are high, you buy fewer MF units and when there's a dip, the same monthly SIP amount buys you more units.
Magic of compounding: When you invest in SIP, interest earned on the principal amount is reinvested. So, over time, your continuous monthly SIP and the returns earned by it achieve exponential growth through a compounding effect.
You can invest according to your time horizon: Depending on your risk appetite and time horizon you can go for the right combination of equity and debt. Equity works best for long term and debt is more suitable for short term.
Past performance check: Those who had invested in mutual funds 15 years ago are now reaping big rewards. You can select the best SIP plan according to your needs by looking at its past performances. Also, you can compare with plans from the given category.
Download Money9 App for the latest updates on Personal Finance.