![]() ![]() This results in a lower average purchase cost and helps generate better returns over the long term. By regularly investing a fixed amount of money, investors can buy more units when the market is low and fewer units when the demand is high. Investing in an SIP is considered a safe investment option as it helps investors mitigate the risk of market volatility through rupee-cost averaging. They should consider the fund manager's experience, expertise and investment philosophy. Investors should evaluate the fund manager's track record before investing in SIP. ![]() The expense ratio is the fee charged by the fund house for managing the mutual fund scheme. Investors should consider the expense ratio of the mutual fund scheme before investing in an SIP. They should consider the fund's track record, returns and risk profile. Investors should evaluate the past performance of the mutual fund scheme before investing in an SIP. They may consider diversifying their investment portfolio across different asset classes, such as equity, debt and gold, for example. Investors should choose the mutual fund scheme based on their asset allocation strategy. They should define their investment horizon, risk tolerance and expected returns. Investors should have a clear investment objective before investing in an SIP. Factors to consider before investing in an SIP Investment objective DiversificationĪn SIP allows investors to diversify their investment portfolio by investing in different mutual fund schemes across other asset classes. As the investment grows, the power of compounding helps in generating higher returns. Long-term wealth creationĪn SIP is a long-term investment option that helps in creating wealth over time. Affordable investment optionĪn SIP allows investors to invest a small amount of money regularly, making it an affordable option for people with different income levels. Investors buy more units when the market is low and fewer units when the demand is high, resulting in a lower average purchase price. Rupee-cost averagingĪn SIP helps mitigate the market volatility risk by averaging out the purchase cost. It gives investors the opportunity to stay disciplined and avoid any potential “impulsive” decisions that may adversely affect their investment portfolio. Benefits of an SIP Disciplined approachĪn SIP helps develop and foster the habit of investing regularly, irrespective of the market conditions. Over time, the average purchase cost will be lower than the market price, resulting in better returns. 5,000 per month in a mutual fund scheme, they will buy more units when the market is low and fewer units when it is high. ![]() This helps reduce the average purchase cost and mitigate the market volatility risk.įor instance, if an investor invests Rs. Under this principle, investors buy more units when the market is low and fewer units when the demand is high. How does an SIP work?Īn SIP works on the principle of rupee-cost averaging. An SIP helps investors develop and foster the habit of investing regularly, irrespective of market conditions. The investor can choose the amount, interval, and mutual fund scheme they want to invest in. *By signing up you agree to our Terms and Conditions ![]()
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