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Pros and cons of investing in the Top SIP plans


SIPs are a great tool for systematic investment. It enables you to channel your savings in the right direction and make periodical investments. This article lists out some pros and cons of SIP Plan that you must know.

Systematic investment plans have been gaining a lot of popularity in the last few years. Banks and other financial institutions are working towards educating the audience about what a SIP is and why it is so useful in this day and age. To the untrained audience, investments are a big step to take considering the kind of risks that are involved with it. However, a SIP is a potentially low-risk investment that does not require you to invest a lump sum to get started.

While SIPs are becoming more and more common these days thanks to the dialogues about it, a SIP like any other investment plan has its fair share of benefits and downfalls to it.

Advantages:

  • Convenience:

This is the first thing you normally think about when you think SIP. These plans do not require for you to visit the bank or financial institution often and put in money. You can apply to any Top SIP plans and simply switch on your auto debit feature on your bank account, and a particular sum of money will get deducted every month to be invested in your SIP. You can easily save money and get returns without having to move a muscle!

  • Low risk:

There is less risk involved with investing in a SIP as compared to an equity mutual fund. Short-term market fluctuations do not impact your portfolio, and overall, you still end up making money once the market stabilizes, so it is not something you need to be worried about constantly.

  • You save more:

Not only do you start saving every month, you even get rewarded for it! SIP works similar to fixed and recurring deposits because you get returns on your investments, but you also have the flexibility of withdrawing when you want to.

  • Small amounts:

You do not have to worry about investing large sums of money each month. A SIP is flexible with the amount you can invest so the earlier you begin, the better. You can even invest just five hundred rupees a month and get good returns over five years!

Disadvantages:

  • Lower returns in rising markets:

If you are putting the money in a marketplace which is volatile such as the bull market, you can expect good yields, but it would not always perform better than a lump sum investment. This is a common misconception. Since you are averaging out the money and putting it in installments, you might get lesser returns than those who are making lump sum investments!

  • Dates:

Did you know? You need to choose a date to invest in every month. However, many SIPs and mutual funds have only a limited set of dates. So if you are looking to spread out the dates in which you invest in different funds, you’re out of luck because your SIP money is invested in them on the same date!

SIPs, also known as rupee cost averaging in our country, have been gaining more recognition with each passing year due to its many advantages. However, it is imperative to do complete research on the SIPs you plan to invest in beforehand to make the right decision. With a good SIP plan in hand, you can see good results in a few years so hang tight!

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