Benefits of Investing in SIP
Every investor wishes to earn a maximum return with minimum risk. Such benefits can be avail under the SIP Scheme along with other benefits:
1. Secure and Lower Risk: Under SIP investments are made under Mutual Funds Scheme where a portfolio of diversified securities is created for investment purposes. Such diversified spread the risk and benefits investors. Moreover, in SIP initial investments are of small amounts that wipe out the capital risk associated with Lump sum investments.
2. Less Hustle: SIP plans come with a feature of auto-debiting directly from the bank account of the investor, so no separate effort and time are to be invested by the investors to handle their SIP investments. Moreover, in the case of being a defaulter in paying instalments, no fine is charged which is the biggest relief for investors with temporary earnings.
3. Advantage of Compounding: SIP is based on the principle of Compounding under which the amount earned on the principal amount (interest) is also added to the investment amount that yields a high return in long run. To get the maximum benefit out of it, one shall start investing at an early age.
4. Rupee-cost Averaging Benefit: Rupee-cost averaging helps investors to fight against the impact of market volatility on their investments and enables them to buy more units of an investment when prices are low and fewer units when prices are high, reducing the average cost of the investment.
5. Build up Discipline: SIP plans force investors to invest a fixed amount at a fixed period ultimately developing a habit of investing in a disciplined manner. Apart from this, the investors get an organised detail of the holding with the Net asset value of the units, making it easier for investors to follow up.
6. Benefit to a Low-income Group: SIP is a platform that provides investment opportunities to people with low and uncertain incomes. The minimum amount of investment needed is as low as ₹ 500 making it possible for them to enter the investment world.
7. Tax Benefits: Investors enjoy certain deductions and exemptions by making investments under SIP. Some of them include tax deductions of up to Rs. 1.5 lakh under Section 80C, long-term capital gains tax exemption (which means any gains made on the investment after a holding period of one year are not subject to tax.), Dividend tax exemption, and so on.