Why SIPs are the Best Investment Vehicle for Millenials?
Last Updated : July 31, 2019, 6:03 p.m.
Why do people make investments? Ummm because they plan on having a decent amount accumulated after a certain amount of time. For millenials, it is a very burning issue that keeps on lingering like a swarm of flies hovering around a doughnut.
You can stop it anytime
No any cancellation fee, no any fine; you can cancel your SIP anytime you like. Isn’t this something which adds convenience on top of other factors that make SIP a safe bet for investors.
You can skip the SIP in case of lack of funds
Let’s talk about a very common situation when it comes to millenials – shortage of funds. Your SIP payment date is nearing and you don’t have the required amount in your account, You will go into panic mode thinking what would happen if you are not able to deposit the SIP sum on time? Well, it turns out, in case of SIPs you can choose to skip your payments for any particular time! Isn’t that fantastic!!!
Invest in small amounts
Another problem which plagues young professionals is the magnitude of investment that they must do in order to attain their goals. How much to invest? Is xyz sum too low for investment? What is the minimum amount that I can invest to get closer to my goals? Rs 500, yes that low! You can start an SIP with a minimum investment as low as 500 bucks per month.
It is a good EMI
In case you have availed some kind of a loan, this point will make more sense to you. Every month a certain amount is deducted from your account towards repayment of the loan you have taken. In case of SIPs the regular deduction of money from your account works towards creating wealth for you and so it is hailed as “a good EMI”
No need to worry about timing the market
Investing in share markets for quick money may not always be a good idea as the market behaviour keeps fluctuating with time. In case of mutual funds, you don’t have to worry about timing the markets as it takes care of that aspect. Remember, any day is the best time to invest in mutual funds if you invest according to your risk appetite.
The power of compounding at your disposal
Many believe Albert Einstein rated compounding as the eighth wonder of the world and why not? Compounding is the ability of an asset to generate earnings, which are then reinvested or remain invested with the goal of generating their own earnings. In other words, compounding refers to generating earnings from previous earnings.
Finance gets more disciplined
When you start investing a certain sum every month, it not only gives you the security of a handsome corpus but it also gives you the thing which is prime when it comes to investing – Discipline. All the investment experts will agree to the fact that it is a disciplined approach which gives the best results when it comes to finance management.
Flexibility to invest as per risk appetite and goals
SIPs are suitable for people of all backgrounds and scenarios. If you want to earn good returns and you have time on your hands, you can invest in equity funds for long term. If you don’t want to take much risk and the window of investment is relatively lesser then you can go with debt funds. Defining your goals beforehand and figuring out your risk appetite before making any investment is the key when it comes to leveraging SIPs for investment.
Advantage of diversification
“Never keep all your eggs in one basket” this idiom is synonymous to investing in mutual funds. Through SIPs, you can choose to diversify the funds in which you are going to put your money. Your portfolio can be something like a balance of equity, debt and liquid funds depending on your goals and risk viability. This ensures that even if one or two funds perform negative, the overall portfolio remains unaffected.
Conclusion
For millenials, money management which encourages discipline, flexibility, vision and planning is always a win-win option and SIPs are good in all these parameters.
Disclaimer – “Mutual fund investments are subject to market risks. Please read the scheme document carefully before investing”