Reasons Why SIP Investment is Best Way to Invest

Mar 22nd 2024

Reasons Why SIP Investment is Best Way to Invest, Though there are several investment channels and modes available for today’s gen-Z investors, nothing can beat the craze for SIP investments. Since, the investments on mutual fund are on the rise, SIP emerges as the most sought-after way of investing smaller amounts in mutual funds. Whether you are investing for longer tenure or to achieve a short-term objective, making smaller payments towards a mutual fund scheme is a wonderful way of accumulating a huge sum of money over time. In addition, you can seek the benefit of compounding which is a big plus with mutual fund investment. Let’s get to know more about SIP investment for today’s investors.

What is SIP?

Put simply, SIP refers to Systematic Investment Plan. It essentially refers to a way of investing in mutual funds. In this type of mutual fund investment, an investor sets a fixed monthly amount every month towards a mutual fund scheme. A person can start a SIP with an amount as low as Rs. 500. In some cases, investors are not allowed to withdraw any amount for the first three years after the beginning of the scheme. When it comes to investing in mutual funds, SIP investment is preferred by a majority of investors as it is easy and affordable.

Read More: Difference Between SIP and Mutual Fund

Benefits of SIP Investments

If you are looking to star a SIP for any financial goal like retirement, daughter’s wedding, home buying, car purchase, it is necessary for you to know the major pluses associated with SIP investment.

1. It makes you a disciplined investor

For those who have a habit of not saving a single penny for their future, SIP investment is the best resort. By investing in SIP in the form of a set amount every month, they get to learn the disciplined way of investment over time. And, at the time of amount realization, they would love to know what they have accumulated so far.

By investing slowly and steadily through SIP, investors tend to learn the art of systematic investing.

2. Compounding benefit

Another big advantage of SIP investment is that investors can enjoy the benefit of compounding interest which is applied on the amount that has been accumulated so far. The total value of SIP will be invested again until it gets matured. This typically results in better returns overall.

For smaller investors, SIP presents an easy and affordable way of getting tremendous outcomes.

Read More: How Do You Withdraw Money from Mutual Funds?

3. No stress of timing

One big advantage of investing in stocks through SIP is that investors need not to worry about the timing of the market. You just need to stay punctual about your investments without worrying about the timing. If the market is going up, you will be allotted more units and the vice versa.

Therefore, the averaging is effective, and at the end of the day, your portfolio will be well-balanced.

4. Flexible investment

SIP investments come with high level of flexibility. It simply refers that you can start or stop a SIP at any point in time. It is very easy to make an entry or exit to a SIP plan. This is one aspect where conventional investment options lack the edge that SIP investment has.

5. Emotional-less investing

The best part of investing in the stock markets through SIP way is that emotions don’t need to get between them. You just need to stay punctual about your monthly SIP outgo and nothing else.

Avoid acting rashly based only on the market's point performance. This is an additional domain in which SIPs are highly influential. You can help yourself by disciplining your investment technique so that you don't react to the markets' short-term volatility.

Also Read: How to Improve Cibil Score After Settlement

6. Scalability

If you come across a pay raise or got some extra money available in your pocket each month, you may decide to create a second SIP plan with various mutual funds that make investments in other markets or sectors.

In this manner, you can begin investing the additional cash you have and earn a respectable return.

7. Pause the SIP if required

If you find yourself in tough financial conditions often, you can choose to skip the monthly SIP payments. There won’t be any harm to your SIP scheme, the fund value, and its future. You can easily resume your monthly payments whenever you find yourself in an easier financial scenario.

This is one part where SIP investment finds a big edge over conventional investment modes.

8. Start small

A person can begin investing with as low as INR 500 per month with SIP. He or she can still benefit from and contribute to the growth of the Indian stock market even if your earnings and savings are modest by opting to invest in SIP programs offered by different mutual funds.

9. Excellent past performance

Various studies testify the fabulous performance of SIP investments over the years. For example, people who started investing in SIP almost a decade back have gained amazing interest over the overall invested amount.

Since, there are different types of SIP plans available to choose from, you can pick the matching your needs and budget the best. In today’s volatile financial scenarios, SIP is undoubtedly the best and easiest way to invest and growth your money that too slowly and steadily.


Till how long, should I invest in SIP?

There is no restriction in terms of time as how long shoud you invest in SIP. You can invest in SIP as long as you want and withdraw the money whenever required.

Can I withdraw amount from my SIP any time?

Indeed, you are always able to take money out of your SIP. There are a few outliers, though. For example, the lock-in term for an ELSS account is three years, whereas a children's savings fund has a five-year lock-in period.

Can I choose to start a daily SIP?

You can change, add, stop, and resume your SIPs whenever it's more convenient for you. With a daily SIP, you can choose to start with as little as Rs 100 per day and then progressively increase your investment amount.

The Conclusion

Hence, now you must be well aware of all the major reasons why investing through SIP can be a great investment option, you shouldn’t make any delay in investing. Delaying your decision to start investing will only make it more difficult for you to achieve your financial objectives. However, ensure that you understand your investment profile, including your risk appetite, investment horizon, and financial objectives, so that you can select mutual fund schemes that best suit your requirements.


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