Investing in the stock market via mutual funds is common among investors wanting to build wealth over a long period. Furthermore, among the two ways of investing in a mutual fund, many investors choose a Systematic Investment Plan (SIP), as it assists them in building financial discipline. This article explains a few more reasons such as rupee cost averaging, for starting an SIP to achieve your investment goals and secure your financial future.
Highly Convenient
Most mutual fund apps allow investors to start and manage their SIPs from anywhere. This eliminates the need to visit physical branches or manage investment-related paperwork. These apps allow investors to select mutual funds, set SIP amounts, and choose the investment duration. This helps individuals to easily start their SIP investments without any hassle.
Simplifying Investments Through Automation
A unique feature that is offered by various mutual funds apps is the ability to automate investments. After investors have set up their SIP, the chosen amount is directly deducted from their bank account at a predetermined date, and invested in funds they choose. This automation assists investors in remaining consistent with their investments, eliminates the potential risk of missing SIP payment and need to process payments each month manually. This, in turn, simplifies the whole investment process.
Ability to Start With Small Amounts
Various mutual fund apps motivate investors to start their investment journey with modest amounts. A broader audience including new investors and young professionals can start investing due to this low entry barrier. The small amount further assists investors build the habit of investing regularly, a process that can accumulate substantial capital with compounding if allowed for a long period.
Rupee Cost Averaging Potentially Mitigates Effect of Market Volatility
As investors continue to regularly invest in SIP, they get the opportunity to purchase more mutual fund units when the prices are low, but fewer units when the prices are high. This strategy that helps investors reduce the effect of market volatility is called the Rupee Cost-averaging. Furthermore, this strategy increases potential gains and eliminates the anxiety associated with daily market fluctuations.
Setting Financial Goals and Being Disciplined
Nowadays, mutual fund apps also offer the feature of aligning investments with various financial goals, such as purchasing a house, saving for a child’s education, or planning for retirement. This allows investors to track their progress and continue their investment plans for longer durations, leading to financial discipline. This eventually assists them in prioritising saving and investing.
Flexible Investment Options
Most apps provide flexibility in the management of SIPs by allowing investors to change the SIP amount and payment date. Furthermore, individuals can also pause their investments or change their mutual funds. This feature allows investors to align their investments with their current financial situations and goals and enables them to monitor the performance of thier portfolio in real time.
Budget Friendly Investing
In comparison to traditional methods of investment, the costs of investing via mutual fund apps are generally lower. This is because the need for physical intervention and paperwork is eliminated, allowing platforms to charge minimal or no fees. This low cost further ensures that all the invested amount is directed towards investments, eventually increasing potential gains.
Resources and Tools to Educate the Investor
To assist investors in making informed investment decisions, various apps provide resources such as courses, investment calculators, blogs and educational videos. These tools further help investors understand the different options of mutual funds, assess their risk appetite, and get an estimate of the future value of their investments. All these tools are designed to aid investors to tailor their SIPs to suit their goals and financial strength.
Beneficial for Saving Tax
By starting SIPs in certain types of mutual funds, investors can potentially gain from tax deductions. One such type of fund is the Equity Linked Savings Scheme which allows individuals to claim deductions up to Rs. 1.5 Lakhs under Section 80C of the Income Tax Act. This aids investors in reducing their taxable income and achieving their investment goals at the same time.
Conclusion
Starting a SIP with the best mutual funds app can be beneficial for modern investors. This is because Investing with SIPs is highly convenient. Furthermore, it simplifies investment via automation, provides the ability to start with modest amounts, and reduces the effect of market volatility. Investors can also set financial goals and ensure financial discipline with flexible investment options with the help of SIPs. Eventually, the resources provided by these apps assist investors in gaining knowledge about the markets. They also assist in understanding the tax-saving ability of SIPs, allowing them to potentially grow their wealth and achieve their financial goals.
