- Great tool to generate wealth: SIP (Systematic investment plan) is a great tool which will help Retail Investors plan to generate wealth over a long period of time through disciplined investment strategy through automated purchase debits.
- Longer the time, better the returns: As markets go through cycles, longer the tenure, better the investment return would be. For an example, if someone at the age of 30 is planning to invest Rs.5000/- per month in a diversified equity fund, with an anticipated return of 12% p.a. throughout the period, corpus could be 46 lakhs at 20 years, 85 lakhs for 25 years and 1.5 crore for 30 years.
- Goal based solution: Starting early, staying invested in a disciplined manner and specifying goal for each SIP will be the easiest way to attain financial freedom.
- Long term to beat Inflation beating returns: long term goals like Retirement Planning, Children education (U.G. & P.G.) has to be planned through equity SIPs to achieve compounding rate of return by investing based on the corpus goal, time horizon left and risk profile of the investor.
- Time in the market is more important than timing the market: During the long phase, when market corrects Investors get the advantage of buying units at lower NAV and during market upcycle, investor will realize the gains obtained by staying invested across cycles. So, short term fluctuations should not matter while planning for LONG TERM SIP.
- Investor Behaviour determines Investment Returns: In the VUCA (volatility, uncertainty, complex, ambiguity) world, downside is very much possible due to multiple events in the short to medium term. Behaviour of the investor determines the success of the investment by staying the course. Equity SIP should be considered if the investment tenure is 10 years and above to have good investment experience.
- Flexibility to invest: SIP is not a compulsory saving option and it is completely democratic unlike other fixed income products and there are tools like SIP Pause/Cancellation which can be utilized in case of temporary financial constraints and it can be restarted anytime. (Flexibility should be used only during emergencies/ job losses not otherwise)
- Active Investment Management: Incase if the chosen SIP fund is underperforming due to fundamental change like (change in fundamental attributes, change of fund manager (or) top management, underperforming peers/benchmark over a period of time), then SIP contribution can be redeployed where the monthly commitment should remain the same even though if it is not from the same fund. A good Mutual fund Distributor can guide you on selecting funds based on your risk profile/goals/corpus amount.
- Incremental savings for higher growth: SIP way of investment with TOP UP option chosen at inception (incremental savings each year end) will help you to reach the goal faster and have a higher corpus than what was anticipated earlier. You can also specify TOP UP CAP amount while signing for TOP UP facility so as to ensure threshold limit is reached within your budget.
- Short term needs: For short term goals like Buying a Gadget, Holiday planning (or) gifting solutions, SIP in hybrid products is highly advisable. Multi asset products, Balanced advantage funds will be good provided investors stay at least for 5 years. In pure debt funds category, stable returns with lower volatility during the course of the journey is expected. Ideally, SIP in debt is suitable for a period of 1-3 years.
