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How to Invest in SIP: Top Benefits of Investing in SIP for Long-Term Growth

Last Updated On 27-09-2024

Long-term investments help you secure steady wealth growth, combat inflation and offer a safety net in case of unforeseen expenses.

One such long-term investment option is the Systematic Investment Plan (SIP). SIPs allow you to invest a fixed amount (or units) regularly in mutual funds, which enables you to build wealth over time through the power of compounding.

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This guide offers a detailed overview of how to start a SIP investment to build a financially stable future.

What is a Systematic Investment Plan (SIP)?

A systematic Investment Plan (SIP) allows you to build wealth by regularly investing a set amount of money at regular intervals, such as weekly, monthly or quarterly.

SIPs automate your investments with auto-debit options. This flexible approach lets you adjust your contribution based on their financial situation and goals.

How To Invest In SIP For Beginners?

Define Your Financial Goals
It is essential that you have a clear understanding of your financial goals to help you decide how much you need to invest to meet these goals. For example, if your goals require earning about 15 Lakhs in the next few years, you can strategise your investments accordingly.
Tie up your SIPs to specific goals
A great way to manage multiple financial goals is to segregate your investments and tie them to specific goals. This helps you change your investment strategies according to the timeline and priority of your goals and also helps you monitor the progress of each investment.
Set the SIP Dates
Select a date for your SIP deduction a few days after your salary date. This helps ensure that your bank account is funded when it's time for the auto-debits, enabling you to avoid missed payments and maintain a reserved amount equivalent to a month's SIP amount in your registered account.
Decide on the SIP type
You can opt for a fixed SIP amount or consider a stepped-up SIP that increases with your income level. Moreover, you can also select the frequency of SIP deduction, that is, weekly, fortnightly, monthly, quarterly, etc.
Select the Right Funds
Depending on your financial strategy and goals, choose the right funds. Ensure the fund aligns with your risk appetite, investment objectives, expected returns, etc., to maximise the effectiveness of SIP.
Evaluate the Performance of Funds
Selecting specific funds based on their past performance helps you choose the most lucrative investment options on the market. It is advisable to focus on funds that have been consistent and tend to outperform their index.
Choose between the Growth or Dividend option
Depending on your preference for building wealth by reinvesting earnings or receiving regular payouts, you can opt for the growth or dividend option.
Monitor and Adjust Regularly
Like any other investment strategy, monitoring and evaluating your SIP portfolio is essential. This helps you ensure that your investments align with your financial milestones. In case they do not perform as you expect, you can consult with your financial planner and make the necessary adjustments to your portfolio.

Also Know About Saving Plan

Benefits of Investing in SIP for Long-Term Growth

With Rupee Cost Averaging, you can get fewer units when the NAV is high and more units when the Net Asset Value (NAV) is low.
Regular investments and reinvestments of returns create a compounding effect which significantly increases growth potential over time.
You can start as low as ₹500 per month and adjust as your income grows.
The automatic bank deductions ensure consistent investments without the need for market timing.
SIPs ensure regular savings with potential returns that can help beat inflation.
SIPs typically offer returns that are higher than FDs or recurring deposits.
You can also withdraw partial or full funds anytime, providing liquidity and reliability.

Conclusion

Investing in SIPs is a smart way to build wealth steadily. Once you start exploring how to invest in SIP, you will be more comfortable selecting funds and investment options that align with your financial goals.

If you are looking for reliable long-term savings solutions, PNB MetLife has an array of plans designed to meet various financial goals, including life insurance, retirement plans, and investment options, all tailored to provide security and growth over time.

FAQs

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Why are SIPs a preferred form of investment

Since SIPs are disciplined, affordable and eliminate the need to time the market, they offer a steady investment approach compared to most other options.

What documents do I need to start a SIP?

To start a SIP, you will need a valid ID, such as a passport or driving licence, a PAN card and bank account details.

Written By: Piyush Kataria

Reviewed By: Sakshi Malhotra

Disclaimer:

The aforesaid article presents the view of an independent writer who is an expert on financial and insurance matters. PNB MetLife India Insurance Co. Ltd. doesn’t influence or support views of the writer of the article in any way. The article is informative in nature and PNB MetLife and/ or the writer of the article shall not be responsible for any direct/ indirect loss or liability or medical complications incurred by the reader for taking any decisions based on the contents and information given in article. Please consult your financial advisor/ insurance advisor/ health advisor before making any decision.

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