When it comes to investing in India, you have a lot of different options available. From risk-free avenues like FDs to riskier stock market investments that require thorough market knowledge. Mutual fund SIPs offer a good blend of market-linked high returns and investment ease. Since MFs are professionally managed, individual investors need not have thorough market knowledge to trade. Among the various modes of MF investment, SIPs remain the most favoured option. SIPs or Systematic Investment Plans ensure small and consistent investments to grow wealth under the power of compounding over time. This article discusses why SIP investments are the best way to invest in mutual funds.

Let’s understand why SIPs are considered the best way to invest in mutual funds:
 

Foster investment discipline

Investing in mutual funds with SIPs helps foster a disciplined saving and investment habit. You must set an auto-debit mandate for each mutual fund SIP. This means a fixed sum of money is automatically debited from your account at regular intervals, ensuring savings and investment before spending. Regularly investing funds through SIPs helps foster a sense of fiscal discipline to save more, better manage expenses, and create wealth over time.
 

Require nominal amounts

No hefty investments are needed to start mutual fund SIPs. In fact, most mutual fund schemes offer SIPs from as little as Rs. 500. The nominal investment amount makes SIPs one of the best ways to invest in mutual funds, especially for small investors with limited income and savings.
 

No market timing hassles

Market timing is a common strategy followed by equity investors to reap maximum gains and minimise losses. However, accurately timing market swings is almost impossible, especially over a long period of time. Failed timing attempts can result in significant losses. Investing in mutual funds with SIPs eliminates this hassle altogether. SIPs operate on rupee-cost averaging where you buy more units when markets are low and less when markets are high. This way the average cost of investing lowers with time.
 

Offers compounding benefits

When you start investing through a growth plan, the earnings from your SIP get reinvested to earn returns. Each reinvestment and fresh instalment boosts your total principal sum to earn compounding returns. In other words, your SIP investments grow exponentially under the power of compounding. The longer you stay invested, the more your corpus grows making SIP investments one of the best ways to invest in the market.
 

Can be halted at any time

SIP investments offer good liquidity benefits. Most mutual fund SIPs allow you to stop and cancel plans at any time. If redemptions are made after the minimum tenure (usually 1 year), no exit load is charged. Moreover, you can quickly redeem your mutual fund investments, especially with liquid funds which typically reflect in your account within just one business day. Therefore, you can easily access your investment corpus at any time to meet emergency financial needs.
 

Option to skip investments when needed

Monetary troubles may arise at any given moment. Sudden expenses can compromise your budget, leaving little to nothing for investment. SIPs offer the flexibility of skipping contributions if needed. Generally, mutual fund houses do not levy a penalty charge if you miss your SIP instalments for up to 3 months. This makes SIPs one of the best ways to invest in mutual funds.
 

Start a new SIP at any time

SIPs are one of the most adaptable investment modes in the market. On one hand, you can afford to miss contributions in lean months, on the other, you can ramp up contributions when your income rises. You can even start a new SIP in a new mutual fund scheme when you get a promotion, bonus, or incentive. Simply put, if your disposable income rises, you can increase your SIP contributions to earn returns.
 

Limits emotional decision-making

Another reason why SIPs are the best investment option is because they help curb the desire for emotionally-motivated decisions. Many investors get swayed by market fluctuations and make impulsive buy/sell decisions. Panic-induced decisions can cost you returns in the long-run. SIPs help avoid this with a consistent investment approach. With a disciplined investment approach, SIPs help you invest regardless of the market sentiments. This prevents you from reacting to short-term volatility and keeps you focused on long-term goals.
 

Good returns

Over the last few decades, mutual fund SIPs have offered impressive returns. Investors who initiated mutual fund SIPs 15-20 years ago have now built a substantial corpus. Most equity SIPs have offered a commendable annual growth rate of 14% p.a., while debt fund SIPs have averaged 9% p.a. These returns rates make SIPs one of the best investment options in the market, especially compared to fixed-income options like FDs and RDs. 

In a nutshell, SIPs offer an easy and convenient way to build a wealth corpus overtime under the power of compounding. SIPs promote consistent and incremental investments without the pitfalls of market timing hassles to ensure good returns over the long-term horizon. Additionally, with a disciplined investment approach, SIPs help minimise impulsive decisions. All this, plus the rupee-cost averaging benefit, makes SIPs one of the best ways to invest in mutual funds.
 

Looking to start a mutual fund SIP? Head to the smart and intuitive Bajaj Finserv Mutual Fund Platform where you can start SIP investments for as little as Rs. 100! That’s not all! You can also compare 1000+ mutual funds, assess their past performance, and browse through various top performers in different sectors to make a choice. Additionally, you can estimate your return corpus using our Mutual Fund Calculator to see where you will likely stand in 10-15 years. 

• SIPs help investors cultivate a disciplined investment approach.
• Consistent investing through SIPs helps average costs over time and avoid the pitfalls of market timing.
• Investors can start SIPs with as little as Rs. 500 and benefit from compounding returns.