Everyone wants to be a millionaire, but there are a few who attain that level. We all think the person procuring that success has something special in him/her. But, as it is said, “Successful people don’t do different things but they do the same thing differently”. This means that the success of a person does not depend on the selected goal rather it relies on the path chosen to fulfill that goal. An aim can be set by anyone but there are a few who are capable of achieving it through their unique technique. Similarly, while investing one can become rich as he/she aspires to be. The strategy followed by them makes all the difference. There are a lot of clients who have inseminated the habit of regular investments. It is true that mutual funds provide an investment mechanism which allows the clients to accumulate wealth penny by penny, known as Systematic Investment Plan (SIP).
In SIP, the clients invest at regular intervals and utilizes the power of compounding. It is a known fact that SIP proves to be more lucrative than any other investment mechanism as it takes the advantage of both bullish and bearish market situations. It is considered to be one of the best investment techniques for the novice investors as they are in their early stage of investing and refrain from putting in a large sum of money due to the fear of loss. However, all clients can make use of SIP- if they prefer a regularized investment process.
Lumpsum v/s SIP
Clients often think that there are two methods of investing then why SIP is the most preferred one. As we all know that a major portion of our society is job-based and since the beginning of their career they follow a systematic saving scheme to gather an amount to serve them in case of any need. Mutual fund is a method of converting those savings into investment through SIP. Lumpsum, on the other hand, is the method of investing in the mutual funds by paying one time and getting the benefits after a few years. This method suits those clients who are either irregular in their investment or do not want to pursue the step-wise investing schedule. As already discussed, a major section of the earning clan are people who are not willing to sacrifice a handsome amount in a single go, so, SIP Investment Plan is gaining momentum among clients having divergent needs.
Psychology of SIP investors
The word of mouth that it is better to invest through SIP when the NAV is high. It is a myth which have to uprooted. As SIP benefits from both market scenarios it is advised by the experts to commence investing as and when the client feels like. Prices are only considered while parking the money in stocks as it helps in profit generation only when the share prices rise. Hence, clients have the notion that the same rule applies to SIP also.
SIP is an investment
Due to the unawareness among the clients they tend to feel that SIP is an investment in itself rather than being a method of investing in mutual funds. Clients need to get out of this misconception, only then they will realize that they invest in a scheme of mutual funds through SIP and not directly into it. However, it facilitates in providing the required returns by using the two major tools, the power of compounding and rupee cost averaging. The former lets the clients multiply their money manifolds while the later allows them to make use of each and every invested penny along with providing averaged returns.
Before investing the hard-earned money into any of the schemes it is necessary for the clients to understand their offerings thoroughly. Talking of SIP, it is a platter full of sweet fruits. The following are some prominent characteristics of SIP :
Creates wealth slowly
The clients have to be patient while investing in SIP because, it is a slow and steady process of investing in mutual funds. It truly signifies the phrase, “Slow and steady wins the race”. The clients have to keep a long-term perspective for their investments so that they are capable of enjoying a good corpus at the time of maturity.
No extra burden on client’s pocket
As SIP is the bridge that converts the monthly savings of the clients into investments, they do not have to pay anything extra in order to create wealth. The clients will have to spare only that amount for investing which they would otherwise save. This means that by putting the same amount in mutual funds the investors will be able to earn a much higher return on their money.
Maximum profit with minimum investment
SIP demands an investment which can amount to Rs. 500, and over a long period will give away profits that would suffice the investing needs of the clients easily. But, the investors should be consistent to pay their installment of SIP all through the stipulated time period. However, missing one or two installments would not affect the corpus much, but it is advised by the experts to avoid doing so.
Hence, SIP is the most convenient method of investing in mutual funds without having to face much hassle. The clients get access to a resource which not only helps them to convert their savings into investment but also serves as an alternative for those who are not willing to sacrifice an enormous amount at a time.
SIP is a method of investing in mutual funds which allow the clients to follow the same investing schedule as they would while saving. In order to attract the clients towards mutual funds, the experts have devised SIP. Though it is not a scheme in itself but it help the clients to create wealth through a systematic process.