We all have dreams and desires which we wish to achieve but very rarely do we pen down these goals and follow a systematic approach to achieve them. There are numerous goals in life with varying timelines, such as, buying a house of your own, going for an exotic holiday, planning for your children’s education, retirement, etc.
If we wish to achieve all these goals without having to make a choice between any of these it is very important that we have an investment plan. An investment plan is a map to get to your financial goal as it helps you to set your destination and the path to get there.
In today’s time, mutual funds have become an integral part of the goal planning for most of the retail investors, and an increasing number of them, rely on investments in mutual funds to meet their financial goals. However, even with regards to investments in mutual funds, SIP is an excellent tool and should be used efficiently in goal planning.
SIPs are a simple, smart and hassle-free way to start your investments and reach your financial goals with ease. SIPs allow you to invest your savings regularly in a systematic manner in varied asset classes, unique to your investment needs after taking into account your risk profile. Here are some of the important benefits of SIPs which make them quintessential for your goal planning:
The disciplined approach to investing
The key to achieving any future goal is to consistently work towards it. Similarly, for any financial goal that you wish to achieve you need to consistently keep saving and investing towards the same. Investments through SIPs help bring about the much needed financial discipline. Once you start a SIP you are forced to invest a fixed amount regularly as the amount is auto-debited from your account. Thus, SIPs by default allow you to regularly invest without getting influenced by market conditions.
Helps start investments with a small amount
In order to achieve your goals on time, it is important to start investing at an early stage. You can start your investments in SIP at the start of your career as you can start with SIPs with a small amount and eventually increase your investment as your income grows. Thus, SIPs enable you to start your goal planning immediately from the beginning having to postpone your investments due to lack of funds.
Power of compounding
Power of compounding, they say, is the eighth wonder of the world. Small investments made today will grow into a large corpus eventually due to the magic of compounding. Even if you do not have a huge lump sum to invest you can always start with a monthly SIP of any amount and due to the effect of compounding over the years help in the process of wealth creation.
Rupee cost averaging
Market volatility makes it extremely difficult to time the market and many times investors miss out making investments as they fear about the entry and exit time in the market. SIPs minimize the risk associated with market volatility as over a period of time they average out the buying cost of your investments.
Flexibility to plan your investments as per your requirement
SIP’s provide you the flexibility to make investments as per your unique requirements. Depending upon how much time you have to achieve your goal, you can choose the SIPs as per your convenience. For example, if your financial goal is one year away, you can start SIPs in an ultra-short-term debt fund. Likewise, if your goal is retirement planning, you can start SIPs in equity funds investing in mid and small cap companies.
For any journey in life that ensures you embark, having sufficient time in hand is always a smart way to begin. Similarly, for all your financial goals, the more time you let your investments grow, the higher are the returns generated due to the power of compounding.
SIP is an ideal route to start your investment journey and linking your future goals to your SIPs can help you immensely. So, fully embrace the power of these SIPs and start with a small but significant contribution towards achieving financial freedom.