Let’s go back to the time of our childhood when we used to carry our piggy banks to all our family members and ask them to put money in the piggy bank.

Subsequently, once the piggy bank felt heavy enough to us we either used to break or open it to collect all the money and buy our favourite things!

Now, imagine, if someone was putting money in your piggy bank without your knowledge as an interest! Wouldn’t you get your desired amount in a considerably short period of time and also more money than you expected?!

So, getting interest upon investments that you make periodically (daily, weekly, or monthly) and saving up huge amounts of money with smaller and regular investments is the basic concept behind SIP Investing.

This article will focus on the concept of SIP Investments and how they have changed the world of savings!

What is SIP Investment?

SIP investment is a form of investment in Mutual Funds in a systematic and planned manner.

SIP investing involves investing in the market at regular intervals through a pre-determined and fixed amount of money.

SIP investment plans are preferred over other forms of investment as they help an individual manage risk better and create wealth for themselves from their hard-earned money.

What is the concept behind SIPs?

Systematic Investment Plans basically run on 2 concepts – Rupee Cost Averaging and Compounding.

• Rupee Cost Averaging – As the amount of money to be invested is fixed by the investor in an SIP Investment plan, the concept of rupee cost averaging comes into play to protect the investor against market volatility.

This implies that when the price of the SIP is low, a high number of units are bought and when the prices are high, a lower number of units are bought.

For example, if you are making an investment of Rs.500 per month and the security price is Rs.50 in a month, you will buy 5 units of the same but if the price increases to Rs.100/unit then, you won’t invest 1000 but buy only 5 units of the said security.

• Compounding – As the duration of an investor’s investment increases they are able to generate wealth exponentially. This implies that if the same amount of money is invested for 40 years, it can provide exponentially more return than an investment of 20 years.

For example, If you make a monthly investment of Rs.1000 at 5% ROI for 20 years, you are likely to get Rs.4,11,034 but if the same amount is invested for 40 years, you can earn up to Rs.15,26,020 for the same investment.

SIP Investment India – Benefits!

Every individual works very hard to earn a living. Therefore, it is very important that they are absolutely sure about the method through which they are investing their hard-earned money to generate wealth.

Some of the benefits of SIP Investment that makes it an investor’s first choice are as follows –

• Affordability – When an investor embarks on the journey of SIP Investment, they are usually bothered by the question what if I make a loss?

As a way to help investors calm their nerves and trust the system, they can start with an investment of as low as Rs. 500 in an SIP (as per SEBI guidelines).

The minimum amount being just Rs.500 helps the investor to start their journey and as their confidence increases, they can increase their SIP investment.

The discretion of the investor to choose their own SIP investment amount makes the whole scheme extremely affordable for the common man.

• Disciplined Savings Method – As the saying goes “Every drop counts!”

Generally, as individuals even if we decide to keep aside some money for the purpose of saving every month, we may fail to do so due to unforeseen circumstances but SIP investing invests the investor’s fixed amount on a pre-determined day as fixed by the investor (unless the SIP is paused) ensuring that the investment is made in each period without fail.

• Flexibility – As compared to other forms of investment, SIPs are fairly flexible investments wherein the investment’s frequency as well as duration is decided by the investors themselves. The investors also have the discretion to pause their SIP investment for a fixed amount of months or close their SIP in case of any emergency and get their funds as required making SIP investing a very liquid type of investment as well.
• Diversification – SIP investing is considered to be better at managing risk as it includes a diverse portfolio of assets in the form of various stocks, bonds as well as securities.
• Tax Benefits – In addition to creating wealth for an individual, some SIP investments also qualify for the tax deduction under section 80C of the Income Tax Act in various countries.

What is better – FD (Fixed Deposit) or SIP?

Every individual has a different perspective with respect to their financial goals and risk tolerance.

As it is said that higher risks yield higher rewards, investment in SIPs is considered to provide higher returns than FDs as the risk profile of an SIP investment is higher than that of an FD.

Additionally, SIPs are considered to be more liquid than FDs as they can be broken at any time without the loss of interest up to that month whereas if an FD is broken prematurely, an investor suffers a loss of the interest earned.

Is SIP Investment Safe or Risk-free?

SIPs include a variety of stocks that include both equity and debt. As equity in itself is not risk-free, the SIP containing equity is also not risk-free due to market risk.

Having said that, it is also to be noted that a longer tenure of investment in SIP can lead to lower market risk in the long run.

Therefore, it can be established that SIPs do offer a higher rate of return than other types of investments but due to the market risk factor that is involved, the return guarantee cannot be claimed at 100%.

How to Start an SIP Investment India – Online Mode?

 Technology has helped the common man in their journey of creating wealth in the most tremendous form. With the world present at the click of a finger, investments in SIP have become extremely easy and can be completed in the following steps –

• Get together all the required documents like PAN card, address proof, bank details, and your picture.
• Complete the e-KYC as required.
• Register with an AMC (Asset Management Company) website of your choice
• Choose the amount to be invested, the scheme plan in which you want to invest, and the options for the investment like dividend payout option, growth option, or dividend reinvestment option.
• Once all the choices are made, you can choose the mode, date as well as frequency of the payment.
• Once all the above steps are completed, the transaction can be submitted.

Withdrawal of SIP – Online Mode

If you found starting an SIP investment to be easy, the withdrawal process comprises much easier steps making an SIP a comparatively liquid form of investment.

If the investor needs the money invested in their SIP for any reason, they can follow the steps given below and withdraw their SIP amount in no time –

• Log on to the AMC website in which you have an account.
• Select the plan as well as the number of units that you want to withdraw.
• Confirm the transaction.

Best Mutual Funds For SIP in India

When investing an investor’s hard-earned money, it is imperative that the investment is made in some of the best SIPs available in the country. To help you for the same, here is a list of some of the best-performing SIPs in the country (Aged 10+ years) –

Name	Minimum Investment	Return (PA)
Quant Active Fund	Rs. 1000	+27.01%
Quant Large and Mid Cap Fund	Rs. 1000	+22.58%
Parag Parikh Flexi Cap Fund	Rs. 1000	+21.95%
Quant Focused Fund	Rs. 1000	+20.24%
Kotak Equity Opportunities Fund	Rs. 500	+19.75%
Edelweiss Large & Mid Cap Fund	Rs. 500	+19.29%
Mirae Asset Emerging Bluechip Fund	Rs. 1000	+19.16%

Conclusion

For an individual who wants to plan for a long-term financial goal, SIP Investments are the best option as the longer the tenure of the investment, the higher the rate of return and the lower the risk factor.

Additionally, SIP investments are also beneficial for all those individuals who find saving up money a difficult task and need to start inculcating this habit to secure their future.

Therefore, with a more liquid approach and easy accessibility to starting and redeeming an SIP investment, it has become the go-to investment option for people around the world!