Learn Why SIP Is An Excellent Approach For Women To Build Money.
Although times have changed dramatically, women still do not have an advantage in household finances. While the general perception is that women do not understand how to invest, women themself are not overly confident in their financial knowledge.
They are unquestionably better savers but lack enthusiasm for investing due to a lack of knowledge. Every homemaker, sister, mother, and daughter should put forth the attempt to learn about investing.
For instance, if you want to buy a house or car for yourself, you need to have some savings. However, the fundamental principle of a sound investment does not lie in selecting the ideal product. It is found in making consistent investments and repeating the proper ones over time. SIPs (Systematic Investment Plans) can assist you in achieving this goal.
6 reasons why SIP is a great way to create wealth for women
Start with what you have
SIPs can be initiated with any minimum sum prescribed (lowest Rs.500 per month) but can later be topped up with additional funds when they become available. Additional units can be bought via SIP as and when funds become available. Such adaptability makes the SIP route more appealing.
Automatic timing
One of the most important advantages of SIP investment plan is that it automates market timing. A SIP entails investing a fixed amount regularly, regardless of whether the market is high or low. As a result, when markets are high, you will automatically buy fewer scheme units, and when markets are low, you will buy more scheme units.
As a result, SIP investors need not monitor or be concerned about market movements on a regular basis. Furthermore, the average cost of a single unit tends to decrease over time. The benefit is also known as “Rupee Cost Averaging.”
Compounding power
The power of compounding allows you to receive returns not only on the money you have invested but also on your gains. And in this way, you can amass a substantial amount of wealth over time.
Assume you have invested Rs 1 lakh in a mutual fund for over a year. It has a one-year return of 15%. This amount will be Rs 1.15 lakh by the end of the year. The power of compounding provides a return of Rs 1.15 lakh in the next year (assuming a rate of return of 15%) instead of your original investment of Rs 1 lakh.
As a result, in the second year, you will receive a return on your investment and the gain from the preceding year. The amount would indeed be Rs 1.32 lakh by the end of the second year.
Inflation effect
Inflation is the true enemy of your future earning potential. Inflation reduces real-term returns. For example, if Rs.100 is required to purchase ten bottles of juice at a 10% inflation rate, you will be able to buy nine bottles of juice next year.
Inflation reduces purchasing power, necessitating this need for inflation-adjusted returns in the long run. Mutual fund returns are typically inflation-adjusted, as they provide long-term returns greater than the inflation rate.
Flexibility
Investors are not needed to make monthly SIP payments to their mutual funds. While it is preferable that you do not skip or discontinue your SIPs, you could never predict a financial contingency. SIPs are, by definition, adaptable. As a result, if you have a financial emergency, you can conveniently skip a month’s payment.
Diversification
SIP in mutual funds is not limited to equity markets but also debt funds, hybrid funds, gold funds, and so on. If you invest in various types of mutual funds like equity, debt, or hybrid, with a minimum sum allocated to each of them, you may enjoy a balanced bouquet of returns as well as decent wealth appreciation when compared to conventional modes of investment such as a bank, fixed deposits, etc.
Conclusion
SIP can be run by simply supplying post-dated cheques or ECS. The cheques can be deposited and the units credited to the investor’s account on the specified dates. SIPs are accessible in almost all Equity, Balance, and MIP schemes. Furthermore, depending on the scheme, SIP can be initiated with as little as Rs. 500. These benefits also make SIPs an excellent investment vehicle for small and retail investors.
With the benefits above, there is no wonder that if you invest in SIP you might end up getting great results. However, as an investor, women should be aware that the market is volatile and that returns cannot be guaranteed.