An investment in SIPs allows your loved ones to reap the benefits of returns without stressing over volatility and also helps instill the discipline of investing for beginners.

This Diwali, gift your loved ones a Systematic Investment Plan (SIP) that will help secure their future and inculcate the discipline of saving for the long run. This SIP or ‘Sapna In Progress’ will take you and your family one step closer to achieving your dreams – whether it is buying a home, or paying for an education overseas for your child, or even providing for a dream vacation that you have been planning for a while.

Simply put, a SIP is a kind of investment where you can set aside a fixed sum of money at regular intervals towards a savings scheme. This amount can be as low as Rs 500. For an average investor, timing the markets to determine the right day to enter and exit an investment in order to make the right returns can prove to be a daunting task. SIPs invest into Mutual Funds where a professional fund manager manages your money and tracks market conditions to take this decision for you.

The other big advantage that SIPs offer is flexibility. The amount of money to be invested, the frequency of the investments and the date when your account is debited can all be preset to suit your requirements. And, even after making the commitment, in case you need the funds for another purpose and wish to skip an instalment, it is possible to do in case of SIPs. Putting your earnings into a SIP helps you beat everyday fluctuations of stock markets and at the same time offers the power of compounding on your earnings, making it an attractive avenue for investments.

Read on to know some of the benefits of SIPs and why you should start one four your loved ones this festive season.

This is a great option for your loved ones who are starting out their journey into investing but looking to build a corpus in the long term, as you don’t need a lumpsum amount to start investing. In a SIP, you can choose the amount you wish to save along with the frequency of every instalment – whether weekly, fortnightly, monthly, or quarterly. The money is automatically debited from your bank account and invested into the selected Mutual Fund schemes.

SIPs allow you to start small. Unlike most other investments where you need a lumpsum amount to start investing, you can start a SIP with as little as Rs 500 every month. Financial experts feel that the sooner you start investing, the better it is. To elucidate, if you start investing into a SIP at age 20, it takes only Rs 842 per month to reach a sum of Rs 1 crore by age 60. If you delay the start by 10 years, the SIP amount is 3X more and if you delay by 20 years, the amount is 12X more.

One of the benefits offered by a SIP is that it allows you to take advantage of market volatility through rupee cost averaging. Simply put, this means that when the markets are up and the Net Asset Value (NAV) is high, the fixed amount that you have set aside towards the SIP investment can buy lesser units of the selected investment, as against times when the NAV is low. So, the average cost of all your holdings bought at different levels over a period of time averages out as the number of installments you pay increases. This gives you the opportunity to earn higher profits on the total amount thus invested.

Those invested into SIPs for the long term are able to earn greater profits owing to the power of compounding. As you continue investing into the SIP, all the returns earned on the mutual fund holdings over a period of time get reinvested into the same scheme to buy more units. So, the more you earn, the larger is the investment amount, thereby offering increased returns. Due to this, SIP is a good investment option to gift to loved ones like children who need to start their journey into investing. It helps them get into the discipline of savings and also have the capacity to see their investments grow over the long term to reap the full benefits.

Starting a SIP in equity or hybrid mutual funds allows you to diversify your portfolio and invest into various sectors and companies, even if the overall size of investment is small. This helps reduce the risk of volatility in the stock markets, yet offering the advantages of higher rate of returns when there is an upside. A SIP also allows you to get the gains from an investment in Capital markets without having to directly own individual stocks or track them on a daily basis to decide your entry and exit time. A SIP invests into mutual funds, which in turn puts the money into stock markets. This movement is controlled by a qualified professional.

The process of starting a SIP and subsequent money transfer is completely hassle-free. To start, all you need to do is fill up a form and sign the SIP application, along with the auto debit or ECS mandate form and a pre-set amount will be deducted from your bank account on a chosen date each month. You don’t need to physically go to the bank to transfer the funds at the time of every transaction. You can monitor the progress of your SIPs through account statements sent out to you or from the website of your AMC.

Signing up for a SIP does not mean that you are going to attract a penalty in case you are unable to pay the instalment at the right time. Even though it is recommended to keep investing into a SIP at the time when your instalment is due, you have the flexibility of skipping a payment or two at times when you may need funds for something else. You also have the option of exiting the SIP at any time since there is no lock-in period like many other investments. This is particularly beneficial if you feel that the mutual fund you started investing into is not doing well and you want to switch to a better performing option.

All Mutual Fund investors have to go through a one-time KYC (Know Your Customer) process. Investors should deal only with Registered Mutual Funds (RMF). For further information on KYC, RMFs and procedure to lodge a complaint in case of any grievance, you may refer the Knowledge Centre section available on the website of Mirae Asset Mutual Fund

Mutual fund investments are subject to market risks, read all scheme related documents carefully.