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Why Invest Using Systematic Investment Plans: 7 Benefits Of SIPs

Read these 7 benefits to know why you should invest in mutual funds using a SIP.
December 11, 2020

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Before we get into the “why” of it let’s understand what SIP means: A Systematic Investment Plan is a method of periodically investing in a mutual fund.

SIPs have become one of the most preferred ways of investing in mutual funds. For context, there are currently more than 3.37 crore active SIP accounts that invest in Indian mutual funds!  

In this blog, we will walk you through the 7 important benefits that a SIP offers and try to answer why SIPs are so popular. 

What Are The Benefits Of Systematic Investment Plan (SIP)?

1. Low Minimum Investment Amount

You can invest in a mutual fund SIP for as low as ₹1000 on an app like Cube. So a SIP ensures that you invest a pocket-friendly amount of your choice every month. 

2. Long Term Wealth Creation

You may be investing say ₹10,000 every month. But this SIP amount will eventually compound into a big sum. 

SIP (1 year)

SIP (5 Years)

SIP (10 years)

SIP (20 years)

₹1,20,000

₹6,00,000

₹12,00,000

₹24,00,000


3. Magic Of Compounding

Your SIP investments will earn interest on interest and the principal. This is known as the magic of compounding.  Here’s the power of compounding in action:

SIP

1 year

5 Years

10 years

20 years

SIP amount

₹1,20,000

₹6,00,000

₹12,00,000

₹24,00,000

SIP Returns @12%

₹8,093

₹2,24,864

₹1,123,391

₹7,591,479

Total

₹128,093

₹824,864

₹2,323,391

₹9,991,479


Here’s an interesting mutual funds compounding rule that you should know about: The 15*15*15 Rule.

4. Financial discipline

The SIP amount is automatically debited from your bank account every month on the specified date you choose. This has 2 benefits:

  • Instils a sense of financial accountability
  • Helps you create wealth

There are downsides to missing a SIP payment. While AMCs don’t charge investors for missed SIP payments, if you miss your SIP payments for 3 months in a row, the SIP will be cancelled. 

But life has several uncertainties and missing a payment may or may not be inevitable for some investors. This is why Cube gives you access to the SuperSIP feature.

With SuperSIP, you can adjust your SIP date, edit the SIP amount or even skip the SIP payment.  

5. Better Returns Than Bank Fixed Deposit

Mutual fund SIPs have the potential to give higher returns than a bank FD or bank savings a/c. 

Type

3 years

5 years

FDs

4-6%

5-7%

Debt MF SIP

9-10%

10-11%

Equity MF SIP

10-14%

15-17%


6. Convenience

SIPs offer the advantage of not having to time the market. This convenience, along with the pocket-friendly nature of the investment, makes SIPs one of the most convenient investment options.

7. Rupee Cost Averaging

Rupee cost averaging can help you navigate through market fluctuations to average out the risk over the long term. 

This happens because:

  • When the market is at a low (bear market), a SIP will get you more units 
  • When the market is at a high (bull market), a SIP will get you fewer units

This can be beneficial for the long term because of the decrease in the cost per unit.

Investment Facts

Best Mutual Fund SIP For 2021

1. Best Debt Fund SIPs

  • Nippon India Liquid Fund
  • Axis Liquid Fund
  • IDFC Banking & PSU Debt Fund
  • ICICI Prudential Corporate Bond Fund
  • HDFC Money Market Fund

2. Best Equity Fund SIPs

  • Mirae Asset Large Cap Fund
  • Axis Focused 25 Fund
  • Kotak Small Cap Fund

3. Best International Fund SIPs

  • Edelweiss Greater China Equity Off-shore Fund
  • Franklin India Feeder - Franklin U.S. Opportunities Fund
  • Invesco Pan European Equity Fund

Start a SIP now

Summary

SIPs can help you average out the risk over the long term and create wealth with the power of compounding. A SIP is also one of the most convenient ways to invest in mutual funds at a low cost. 

However, choosing the right funds is important to achieve your investment goals. Cube helps you do this by giving you access to the best mutual funds hand-picked by our advisor, Wealth First.  

The Cube Wealth app also makes it easier to invest in mutual fund SIPs with features such as the QuickSIP and SuperSIP.

Start your SIP Today

Here’s a snapshot of how QuickSIP and SuperSIP look on the Cube Wealth app:

1. QuickSIP

2. SuperSIP


FAQs 

1. Is it wise to invest in SIP now?

Ans. It's never too late to invest in a SIP since they are long term investments and tend to average out the risks over 5+ years. Speak to a wealth coach today to know more.

2. Is SIP good or bad?

Ans. SIPs are one of the most efficient and effective ways of investing in mutual funds. However, picking the right mutual fund is crucial to achieving your goals. Get a free consultation with a wealth coach to know how you can start a SIP today.

3. What is the minimum SIP amount?

Ans. The minimum investment amount on the Cube Wealth app is ₹1000. 

In-App Guide: Quick SIPs for MF 



Shriram Shekhar
Shriram is a Consultant at CubeWealth. He has developed cutting edge IT products for over 2 years before turning to his passion for the written word. His love for philosophy, developing products, and empowering people through quality content is what got him to CubeWealth.

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