It is always a point of discussion among the people why SIP (Systematic investment plan) is better than share market investments. The share market has its own risks, but we have also seen many success stories of people investing in the share market and getting an increase in their investment by 1000+ times or more. But the share market has its own risks of losing your money. Here SIP can be the best option for systematic growth over time. Long-term investments in SIP make you richer than you think. You can earn good money using SIP by regular investment.
A
Systematic investment plan or SIP is a type of method to invest in mutual
funds. It allows anyone to invest a fixed amount of money at regular intervals like weekly, monthly,
or quarterly instead of making a one-time investment.
SIPs are
great methods and are designed to help investors build wealth over a long
period of time. Here is the screenshot we are giving you below which describes
how you can earn using SIP over time.
SIP investment conversion over the time SCREENSHOT:-
Let's
understand its in-depth information and how it is far better than Share market
direct investments:-
Using the
SIP, you commit to investing a specific amount on a regular basis which could
be ₹500, ₹1000, or more per month.
This regular investment helps to build a habit of investing and savings.
SIPs work
on the principle of rupee cost averaging, which means you buy more units when
prices are low and fewer units when prices are high. Over time it helps you
average out the cost per unit and reduces the risk of market volatility which
means you will not lose any amount as per past experiences.
SIPs take
advantage of compounding. That means if the returns are generated are
re-invested to earn more good returns. Over time it easily helps you to make
money growth significantly. This is one of the most successful ways to generate money over the time
limit.
SIPs are
flexible, you can start a SIP with a very small amount. It could be Rs. 500 per
month. Additionally, you have the flexibility to increase or decrease the
amount, pause, or stop the SIP whenever you wish.
With SIPs,
you are free from the timings. You don't need to worry about trying to time the
market like buying at low prices and selling at high prices. You keep investing
consistently, regardless of market conditions that can help you with reducing
the impact of the short-term volatility.
Why SIP Is Better Than Share Market Regular
Investment?
Here is why
the SIPs might be considered far better than the regular direct share marketing
investment. Check here:-
1. Disciplined and Regular Investment
SIPs
encourage disciplined and regular investing habits which is very important.
Investing a fixed amount of money at regular intervals like the weeks, months,
quarterly, etc can help in building a habit of investing and saving. In
comparison to regular investment, SIP allows you to invest regardless,
consistently of market conditions. This is a great example of avoiding the
pitfalls of emotional investing.
2. Rupee Cost Averaging
SIPs take
great advantage of a concept called rupee cost averaging when markets are down,
your fixed investment amount buys more units, and when the markets are in good
condition it buys fewer units. This is the best way to reduce the overall cost
per unit over the time limit and helps mitigate the impact of market
volatility.
3. Lower Risk Exposure
SIPs
typically invest in mutual funds which hold a diversified portfolio of stocks
or bonds. This is the best way to reduce the risk in comparison with the
investment stocks directly. Where your investment is exposed to the performance
of just a few companies. All the investments are managed by professional fund
managers who analyze, research and make decisions on behalf of investors. This
reduces the risk of poor stock selection.
4. Affordability and Flexibility
SIPs allow
you to start investing with very small amounts which makes it even easier for
individuals to start investing without any need for a large sum of money
upfront. You can increase or decrease the amount of SIP any time or even you
can stop it temporarily if needed. This flexibility is not always available
when buying individual stocks.
5. Long Term Growth and Compounding
Do you know
that Regular and long-term SIP investments take advantage of compounding?
Reinvesting earnings helps grow your investment over time which is even better
if you invest for a long term like more than 10 years. SIP encourages a
long-term approach to investing which helps you to increase your wealth
creation. Direct stock market investments can sometimes lead to a more short-term speculative mindset, which has so many risks in the investment world.
6. Long Time Consuming
You do not
need to monitor actively and on a regular basis. Direct investment in stocks
requires regular monitoring of the market, news, and research every day and
also there are many other factors. With SIPs, once you set up your plan, you
don't have to spend as much time managing your investment, on the other hand,
the Mutual fund is managed by experienced experts.
7. Goal-based investing is always a plus
Tailored
for financial goals, SIPs can be aligned with specific financial goals like
buying your own house a day, children's education, or retirement. They provide
a structured way to achieve these goals over a period of time by systematically
investing a fixed amount every time.
SIPs are a
very simple, disciplined, and risk-free way to invest money for investment
purposes. You can earn a good amount by investing for a minimum of 10 years to 20
years which is very good.
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