BY ANUPRIYA
In today’s world, we need to set aside a significant portion for future financial needs in all the spheres. A planned and calculated financial plan is needed for every individual. The possibility of a negative future outcome from investment could prompt you to put yourself in a doubtful condition and not let you take a decision today even though that investment may be required to achieve your life goal. It is important that you follow standard rules for making investment decisions. It is specially designed for those who aim to build wealth over a long period and want a better future for themselves and their dependents. In a systematic investment plan, investments are made in periodic investments. It helps to balance emotions and improve your chances of achieving life goals. The investment in a SIP plan in India, additional units are added to your account depending on the market rate and the amount being reinvested is larger and so is the return on those investments.
SIP can be the best investment option for you if you do not possess superior financial literacy about the way the market works. Spending time analyzing the market movements or thinking about the right time to invest in. In SIP since the money gets auto-deducted from your credited account and goes to your master saving account, you can sit back and relax without critically thinking.
Advantages of SIP:
Unlike the lump sum investments, it ensures that you are working actively towards making your investments grow because of the periodicity. It is a disciplined way of investing that ensures you constantly strive to make your investments grow. The automatic deduction makes sure your investment grows as opposed to lumpsum where you may forget to invest some time. The small amount you invest daily grows up at large as a sum of your contribution and the returns compounded over the years. The investments can be started anytime ensuring minimum risk with a suitable scheme plan. It is important for the investor to choose the scheme which suites the long-term investment goals. Therefore, there’s no time period within which an investor start a SIP investment plan, the better the sooner. It is flexible, the investors may stop investing in their chosen scheme anytime or may choose to increase or decrease the investment amount.
Such active decision making for an investment reduces stress. It offers a disciplined approach to saving money. Analytical thinking as opposed to in-built thinking consumes energy and can be tiring. That is why our brain typically applies mental shortcuts to make decisions. A wrong decision could reduce your chances of achieving your life long term planning. Applying analytical thinking each time you make a decision for an investment can be overwhelming and stressful. Therefore, we often tend to avoid taking such decisions. Critically thinking about each time you make an investment can be eliminated by setting up a SIP.
It works well if the entire process is mechanical. Set up a savings account in a bank other than the one where your monthly income is being credited which is your master investment account. It is designated for all our equity SIPs. Second, every month, transfer your savings from your salary credited account to your master investment account. Investing in a disciplined manner without worrying about market volatility and timing the market. The power of compounding is best as you stay invested that helps your money earn more, over the years. As you get ready for work, be rest assured that SIP is working towards your goals and helps you keep your success in progress. Investing regularly through SIPs, your returns get reinvested. Over time, it results in a snowball effect, that increases the potential returns manifold. An ideal way to maximize this gain is to invest for an extended period. This also means you may benefit by investing as early as possible.
Your savings and dividends from your investments will be credited into this master investment account, making it easy for you to use the money only for the intended purpose. We can set up a process that can help us to balance the negative effects of emotions when we take financial decisions. SIPs are the best way to temper inertia and regret for all your life goals. A SIP can be set up for all your investments- equity, bonds, personal savings, and even real estate. The only time active decision you have to make is when you set up the SIP- how much to invest and on which days of the month the investment should be made. Thereafter, you have to engage your analytical brain only for savings requests. By choosing the SIP route to investments, the investment is in a time-bound manner without worrying about the market dynamics and stands to benefit in the long-term due to average costing and power of compounding.
ABOUT THE AUTHOR
Anupriya, a student of Kirori Mal College, University of Delhi pursuing bachelors in Zoology. She is immensely interested in experiencing and trying new things whatever comes her way and wishes to explore more. She is a person who lives a regular pattern life in irregular ways.
Disclaimer: The views expressed in this article are the author’s own and do not necessarily reflect the views of the organization.
Comments