Posted on September 29, 2018
Want to Test the Power of Saving? Start Investing in SIPs Today
Warren Buffet once said, “Do not save what is left after spending, but spend what is left after saving.” How often have you been advised by your parents and well-wishers to make saving a habit? Saving money not only makes you financially secure, but provide you a safety net in case of an emergency too.
Of course, given all that one wants to experience in life and the comforts one aspires for themselves and their family, being able to build a huge savings corpus seems like a distant dream. Today, the key to successful saving is disciplined saving. Thankfully, there are many tools like SIP mutual funds that make you disciplined about your savings without infringing on your monthly expenses. They allow you to make regular investments of as little as ₹500 a month. The amount accumulated over time through such systematic investing can be used to fulfil various long term and short term goals.
What are SIP Mutual Funds?
A Systematic Investment Plan (SIP) is an investment vehicle offered by mutual fund providers that allows investors to put specific amounts of money at regular intervals for a period of time. Such investment plans are very similar to the regular saving schemes like recurring deposits.
One can invest in an SIP in three easy steps:
- Register online for the SIP
- Provide the required details
- Make sure your bank account has sufficient funds.
How do SIPs Work?
When investing in SIPs, the investor basically buys units of a stock at a pre-decided frequency. SIPs are based on the principle of cost averaging. This means that in a falling market, investor buys more units, whereas in rising market, lesser units are bought. At the end of the tenure, the total units purchased is multiplied by the average unit price to find the total value SIP holder will receive.
In most cases, this brings more returns than lump-sum investments, where units are purchased in one go at the starting of the investment plan.
According to an article published by The Economic Times in June 2018, there was a 9% increase in the collections in mutual funds through systematic investment plans (SIP) in May 2018, from the previous month. With this increase, the collections touched an all-time monthly record of ₹7,304 crore.
The good part is that the investor has full control over their investment. They choose the scheme in which they want to invest and decide the amount too, using an SIP calculator.
Save Early to Save More
Starting early is the key to taking advantage of the power of saving. If you have set yourself a certain amount of savings, starting late will increase the monthly financial burden. There are high chances that you might miss the deadline for your desired goals too.
The best time to start saving or start investing in a Systematic Investment Plan is now. Even with the smallest possible contribution, you’ll be amazed to see the pool of wealth you accumulate at the end of the plan’s tenure. You will not have to think twice before fulfilling a dream or doing things you always wanted to do.