Let’s assume that you aim to lower your cholesterol level in one month. You could follow two ways: first, you continue eating junk and avoiding exercising for the first half of the month and suddenly crash diet for the second half. Or second option, you start right away with a healthy diet and exercise every day.
The answer is straight. Fitness never has a short-cut – whether physical or financial. You have to start with small steps, gradually catching pace and maintaining regularity.
Such a way of investing is called a Systematic Investment Plan.
The term Systematic Investment Plan (SIP) refers to a route of investing in mutual funds. To understand it better, let’s break the word down. Systematic – it means discipline or investing every month or every quarter, every six months or even every year. What counts is investing regularly. Investment – setting aside a sum of money to save. Plan – a step by step approach to building your money.
Now that you understand what the term means, let’s understand the process.
A Systematic Investment Plan is a way of investing in mutual funds, in a regular manner. All you have to do is set aside a sum of money every month/six months of a year, and invest it in a fund of your choice. SIP is just an alternate route of investing in your regular mutual fund.
For staying fit, it's not mandatory to hit a gym. There are simple exercises to help tone your body without having to go to the gym. Jogging, walking and doing some floor exercise at home can equally make a difference.
Similarly, while investing in mutual funds through SIPs, it’s not mandatory to begin with a huge amount. You can start with as little as Rs. 500 a month, if that is all you can set aside. Just be regular and don’t miss your installment. Just like you would pay an EMI for a car or home, think of your SIP as the EMI you are paying yourself, for your future.
Exercises can be done anywhere and anytime like from standing in line to sitting at your office desk. SIPs are flexible in nature, thus, investors can choose to decrease or increase the amount of investment, or stop investing in the plan whenever they want.
With an SIP, you don’t have to keep track of when your installment is due. SIP installments can be made by instructing your bank to perform an auto-debit on a specific date every month in your chosen mutual fund scheme.
No one can force you to eat right and exercise, so you must use self-discipline to get up off the couch and throw away that bag of chips. Similarly, SIP is a disciplined approach to wealth creation. Since the money invested in SIP can be a smaller amount than investing in lump sum, and by virtue of the auto-debit facility, over a period of time your investments get disciplined and you don’t miss out on them.
Just because you miss working out few days, or binge eat once while, or see the results of your workout within few days, doesn’t imply you stop continuing. Equity markets are prone to volatility and keeping track of every such situation is difficult. Investing in mutual funds through the SIP route helps you get the best of volatile markets by maintaining a constant investment pattern. And more so, the investment is taken care of by the fund’s fund manager. It is important to stay invested.
If exercise is done with discipline and dedication, you will see the health benefits and energy compounding. Similarly, compounding is one of the biggest benefits of investing in a mutual fund through SIPs.
So why not start the journey towards a better health and wealth!
Mutual Fund investments are subject to market risks, read all scheme related documents carefully. CL05744
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