Small Investment of ₹ 500 Is Better Than No Investment
Not everyone can spare a huge sum
to invest in a mutual fund or any other scheme in one shot. This is
particularly true for those who have just started earning. For them, it is
better to invest in smaller amounts regularly and systematically i.e. small
SIPs. In this article, we will discuss why it is important to start small SIP
if one-time investment is not possible.
Why SIP is good for beginners?
An SIP lets you save a certain sum
regularly, and this sum can be as small as Rs.500 per month. So, you do not
need to have large disposable income, just need to be consistent to accumulate
wealth and inculcate financial discipline. This will help you overcome
temptation (to spend all at once) and make logical and systematic financial
decisions. Indeed, small SIPs are better than no investments.
Systematic Investment Plans will also prevent you from catching the market volatility and getting burned. A pre-agreed sum you can comfortably shell out per month can save you taxes as well as grow wealth without the need for market timing.
Systematic Investment Plans will also prevent you from catching the market volatility and getting burned. A pre-agreed sum you can comfortably shell out per month can save you taxes as well as grow wealth without the need for market timing.
Benefits of investing in small SIPs
Builds financial discipline
Saving an amount habitually imparts
staunch financial discipline. You will get into the habit of investing
regularly and it will be easier to fight the temptation to spend all your
salary.
No need to time the market
You do not have to constantly keep
an eye on the market rise and falls. Investing lumpsum requires you to assess
the market movements and it can cause you to delay your investment decisions.
Option to automate payments
If you set the amount to be
auto-debited on your salary date, it will be easier for you to plan your
monthly budget. You do not need to put any additional effort.
Scope for higher returns
It averages out the expense ratio
(mutual fund costs), which translates to more returns. This is because when you
invest habitually over a term regardless of the market mood, you can own more
units when the market is down.
Power of compounding
As mentioned above, power of
compounding works here more. Starting small can be advantageous because it creates
wealth faster and steadily.
Flexibility for low to mid income investor
Small SIPs offer you more
flexibility. As you go up the career ladder, you can even increase the monthly
SIP amount accordingly. It is less stressful to invest small but manageable
sum.
Easy way to save tax and grow wealth
Investing in ELSS through SIP is
non-taxable upto Rs.1.5 lakhs per financial year as per Section 80C of the
Indian Income Tax Act.
**Disclaimer: This Article is only for information Purpose and
should not be treated as Financial Advice.
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