We all have a myth that equity funds carry lot of risk even to the extent of loosing ones entire corpus. However, this happens only if it’s a short term investment. Investment in equities requires one to be in constant touch with the market. They are best for long term financial goals. Equity funds are one of the investment options that can build large wealth. Over a long term horizon, equity investments have given returns which far exceed those from the debt based instruments.
A systematic investment plan is the answer to preventing the pitfalls of investing in equity funds and still enjoying the high returns. Let’s look at few reasons why you should invest in SIP
- Systematic Investments
As the names says, SIPs are more systematic and organized. It instills a habit for you to start investing regularly and consistently. While you invest in SIP, choose a plan in which you get expert guidance and flexibility. For many of us who do not have the desired expertise and are too busy to keep on researching about the market’s performance an SIP which provides an option to switch between funds as per risk appetite acts as a boon.
- Putting eggs in different baskets
Another advantage is that even with small amounts you are able to enjoy the benefits of diversification. You can pick and choose the amount you wish to invest in Equity, Debt and Balanced funds. This will let you stabilize your investments even if a particular industry makes the market volatile.
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- Market timing becomes irrelevant
SIP is disciplined investing irrespective of the state of the market. It thus makes the market timing totally irrelevant. And today when the markets are high, it may not be prudent to commit large sums at one go. Investing for long term as an economy point of view, one can expect handsome returns because of regular investments.
- Does not strain your daily finances
if we were to buy directly from the market, one-time investments would be required. However, when it comes to SIP you can invest small amounts for long duration and reap the benefits. This makes investing easier as it does not strain your monthly finances. It, therefore, becomes an ideal investment option for a small-time investor, who would otherwise not be able to enjoy the benefits of investing in the equity market.
- Helps to fulfill your dreams
Financial goals like buying a house, children’s education, marriage etc. require a huge one-time investment. It would not be possible for you to raise such large amounts at short notice. SIP will help you build the corpus over a longer period of time, through small but regular investments. These small investments, over a long period of time will result in large wealth and help you fulfill your dreams.
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