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6 key features of sip investment in india

6 key features of sip investment in india

get information on best sip in India. here is a look to 6 important key features of sip that helps to make mutual fund investment a lot easier.
February 13, 2021
7 min read
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6 key features of sip investment in india

6 Key Features of SIP Investment in India

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systematic investment plan (sip) is an investment plan that lets you make regular mutual funds investments. by opening a sip, you will be paying a regular amount to the sip, which is then invested in specific mutual funds schemes.

with a mutual fund sip calculator, you can determine your returns against an estimated annual return rate. the regular investments made are used to purchase the mutual fund units, depending on the net asset value (nav) of the scheme. with each investment, the number of units held by a person increases. let's look at some of the important features of sip investment in india.

1. ease of investment

a sip can be started online or physically in a hassle-free manner and with minimal documentation. with the information provided like pan, income details, income tax details etc., one can get a sip account approved based on their kyc compliance. the sip can be linked to your bank account, and most sip accounts can be accessed online through a web browser and app.

2. disciplined saving

saving requires discipline and consistency, both of which is made possible in a sip investment. even if you contribute only a small amount to your sip scheme, you make payments every month and continue it for a long time. it helps people develop the habit of saving and encourages saving even with limited income.

3. small savings made possible

sip offers an ideal saving and investment platform for new investors who have limited knowledge of various investment options. people who are new to investing or have limited money to save every month find sip convenient. the periodic sip contribution can be selected as per the investor's ability. even if the contribution you make in sip is small, it can fulfil your financial goals with time and consistent contribution.

4. the benefit of compound interest

sip can grow to a significant amount with time even with a minimal, regular contribution. the reason for the same is the compounding of interest. if sip is started early on in life, the early investments' return continues to get added to the latest contributions, thus generating a higher return with time. you can understand it further when you calculate your monthly contribution for a certain period in a sip return calculator.

5. rupee cost averaging

as mentioned earlier, the number of units purchased under sip depends on the nav of the purchased mutual fund. in an underperforming market, the sip will be able to accumulate more units. but in a booming market, the nav will be higher, and your regular contribution will be able to buy a lesser number of units. as a result, the mechanism of rupee cost averaging is applicable in sips, which lowers the average per-unit cost in the long-term, as compared to lump-sum investments.

6. flexibility

another attractive feature of sip is that it can be discontinued without paying any penalty. if you cannot continue it for any reason, you can halt the sip and stop the periodic contribution.

final words

you can use cred's sip calculator to know more about your sip's amount and duration and start investing to achieve your financial goals.