There will be many people advising you to invest. Some advice is important, while some are not. Some will tell you to invest in equity, while others will show faith in mutual funds and advise you to invest through SIP. Your experience and knowledge of investing will decide what is right and what is wrong. But if you are new to this field and want to adopt new methods away from traditional methods, then SIP (Systematic Investment Plan) can be a very good option.

In Jagran Business' program "Finance Ke Funde", Deepak Thukral, Founder and Managing Partner, Moneytecture discussed this topic in detail.

What is SIP?

Employed people usually do not have the option to invest a large amount at once. They want to start investing with a small amount. Deepak believes that "SIP is a great concept. You can start your investment in a mutual fund through SIP. There is no need to invest a lump sum amount for this. It has low risk and can give better returns over time."

Benefits of SIP

1. Risk diversification

If your investment is diversified, your risk can be reduced to a great extent. Through SIP, you do not depend on any one stock or sector but invest in different sectors. In SIP, you can get better returns than lump sum investment by taking the average of Net Asset Value (NAV).

2. Regularity and discipline

Discipline is very important in investment. SIP motivates you to invest regularly and helps you achieve your financial goals. When you invest a fixed amount every month, your fund grows gradually and gives good returns in the long run.

3. Accessible to everyone

Everyone can invest through SIP. It does not require a lot of capital. Even if you have a small amount of ₹ 500 or ₹ 1,000, you can start your investment journey. It also gives individuals with limited resources a chance to grow their wealth systematically.

4. Power of Compounding

Power of Compounding means the ability to earn interest on interest. This can help you grow your wealth exponentially over time. SIP not only promotes regular investment but also helps in getting maximum growth in the long term.

Effect of SIP on investors

The number of people investing in SIP has increased in the last few years. Many investors have been doing SIP for years and are benefiting from it. Deepak says—

“When I started my career, I invested through SIP. I remained disciplined for 20 years made small investments and created a large amount, which helped me buy a house. The regularity of SIPs made the process easier."

If you have set a goal of buying a house, a child's education, or retirement, SIP can be a great option. You can calculate the required investment based on the estimated return rate and time horizon. This can prove to be more beneficial than taking a loan or delaying savings.

How to start a SIP?

1. Complete KYC

Complete the KYC (Know Your Customer) process online or offline. Make sure your contact details are correct, to avoid any communication gap.

2. Choose a mutual fund

Choose a mutual fund based on your risk profile—equity fund, debt fund, or multi-asset fund. Mutual funds are classified from high risk to low risk. Choose the right fund as per your comfort.

3. Choose the duration of SIP

Once you have chosen a mutual fund, you need to decide the frequency of SIP—daily, weekly, monthly, or yearly. This decision is based on your income and expenses. 1. Make your investments personal

Don't blindly follow others. Plan your SIP based on your income, savings, and financial goals, so that it is convenient and manageable for you.

5. Have a retirement perspective

Everyone will retire someday and expenses will not reduce even after retirement. Ideally, try to save as much as you spend today. SIP can help you build a large corpus over time, making it possible to live a comfortable life after retirement.

Disclaimer: This content has been sourced and edited from Dainik Jagran. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.