Importance of Systematic Investment Plan in Our Life
Systematic Investment Plan is something I have preached for quite some time and I have some important reasons for that. Now, these reasons may vary from person to person but these are important for me so let's see if these reasons are important to more people than me. SIP feature allows an Investor to invest a pre-decided SUm of Money into anything he has decided whether it is a Mutual Fund or a Basket of Stocks on a monthly basis. This has a bunch of benefits for a Normal Investor like me and I would like to point some of them out.
FREEDOM OF TIME
The biggest benefit of using a Systematic Investment Plan is that you have complete freedom of your time and you don't have to worry if the market is going down or up as you will be investing every single month. This way you can enjoy life more rather than looking at the charts and wondering what's going to happen next.
FINANCIAL DISCIPLINE
Through Automation of your Investment, you are basically making a Financial Discipline for yourself which means no matter what you do and be if you forget to Invest, the SIP invests for you automatically like clockwork. Now some may consider this risk as you may not have enough Cash in the Bank for the SIP to go through but the amount of SIP that you Pre Decide should always be at a limit that your Earnings can Cover every single month as that way you won't miss a date.
POWER OF COMPOUNDING
Power of Compounding might be the most important and strongest benefit of SIP as when you Invest Money every single month like clockwork at some point in Time the Compounding effect starts to take place and your Investments grow in Value substantially more than you would expect. Personally, I have reached that time period in my Investing Timeline when the Power of Compounding is in effect but I am really looking forward to that and seeing how it changes my life.
Now that you understand the benefits of a Systematic Investment Plan there is something else that you need to know and that is called Step Up SIP. Don't fret as it is not difficult to understand at all, it simply means that every year when you get an Increment in your Salary you also decide to increase the amount of SIP that you have been continuing for the last year. For example, I had around 15000 INR as my SIP amount for 2021, and now that it is 2022 I have increased my Amount from 15000 INR to 16000 INR thus increasing my Investment Amount by 7 percent.
The reason for doing this is to further progress your Goals toward FINANCIAL FREEDOM.