Equity Investing: Why SIP is a big hit with investors

Investing via SIP is a slow but sure way of beating market volatility without having to worry about timing the market. And online investment platforms make it easy Young, digitally-savvy individuals are increasingly en.alamrany in equity mutual funds through the systematic investment plan (SIP) route because of ease of en.alamrany, benefits of disciplined en.alamrany without having to worry about market volatility and the power to compound money over time. Data from Association of Mutual Funds in India (Amfi) show that SIP inflows have touched Rs 1.1 trillion in this financial year till February, the highest ever. In February, there were 51.7 million outstanding SIP accounts through which investors regularly invested in mutual fund schemes, a growth of 37% from 38 million accounts in April 2021. Beating volatility in the marketsSo, why are investors betting on equity funds through SIPs? Experts say en.alamrany through SIP is a slow but sure way of beating market volatility without having to worry about timing the market. Brijesh Damodaran, managing partner, BellWether Associates LLP, says new investors, especially the younger ones,have seen the power of disciplined en.alamrany over the past two years while older investors have seen their wealth compound through SIPs. “With the financialisation of the economy, the equity culture will only grow and many more investors will invest through SIPs,” he says. Indians have been traditionally en.alamrany in recurring deposits through small sums of money. That saving habit is being channelised through SIPs due to the collective effort of the financial industry. Sushil Jain, CEO, PersonalCFO.in, a wealth management firm, says retail investors want to participate in the growth of the Indian economy. “For new investors, the comparatively safer way to invest in an equity mutual fund is through SIP. Due to the presence of many online investment platforms it is convenient to start a SIP account and start en.alamrany regularly, like every fortnight or month,” he says. Factors to keep in mindThe time horizon of the SIP investments is the key to earning higher returns in the long run. The investments must be long-term, ideally more than five years, moving over a few market cycles. In fact, in volatile market conditions, the rupee cost averaging works best in SIP as investors get more units on the investments when the markets correct and lower units when the markets rise. Though SIP is one of the best ways of en.alamrany to reduce the equity market risk, investors must check whether it is suitable for them at all times. Jain says SIP is good for those new investors who do not want to take any risk but want to invest in the equity market. “But if you have a lumpsum and can invest for the long-term, then the lumpsum investment will help you to create a larger corpus because of compounding for a longer period,” he says. If you are looking to time the market, then SIP is not the option for you. Damodaran says in a rising market, immediately followed by a falling market, the short-term returns in equity schemes will not be encouraging and there will always be a return-expectation gap. In fact, starting a SIP at the top of the market immediately after the next slump may lead to bad SIP and investors may be tempted to stop the SIP or redeem the money. And that will be a sure way of losing your hard-earned money. Investors must look at the consistency of the scheme before en.alamrany, as a top-performing scheme may not always remain a star performer. Investing in index funds is the safest option when taking the SIP route as the expenses will be lower than an actively managed fund and the SIP returns will mirror the index returns.

Equity Investing: Why SIP is a big hit with investors

Investing via SIP is a slow but sure way of beating market volatility without having to worry about timing the market. And online investment platforms make it easy

Young, digitally-savvy individuals are increasingly en.alamrany in equity mutual funds through the systematic investment plan (SIP) route because of ease of en.alamrany, benefits of disciplined en.alamrany without having to worry about market volatility and the power to compound money over time.

Data from Association of Mutual Funds in India (Amfi) show that SIP inflows have touched Rs 1.1 trillion in this financial year till February, the highest ever. In February, there were 51.7 million outstanding SIP accounts through which investors regularly invested in mutual fund schemes, a growth of 37% from 38 million accounts in April 2021.

Beating volatility in the markets
So, why are investors betting on equity funds through SIPs? Experts say en.alamrany through SIP is a slow but sure way of beating market volatility without having to worry about timing the market. Brijesh Damodaran, managing partner, BellWether Associates LLP, says new investors, especially the younger ones,have seen the power of disciplined en.alamrany over the past two years while older investors have seen their wealth compound through SIPs. “With the financialisation of the economy, the equity culture will only grow and many more investors will invest through SIPs,” he says.

Indians have been traditionally en.alamrany in recurring deposits through small sums of money. That saving habit is being channelised through SIPs due to the collective effort of the financial industry.

Sushil Jain, CEO, PersonalCFO.in, a wealth management firm, says retail investors want to participate in the growth of the Indian economy. “For new investors, the comparatively safer way to invest in an equity mutual fund is through SIP. Due to the presence of many online investment platforms it is convenient to start a SIP account and start en.alamrany regularly, like every fortnight or month,” he says.

Factors to keep in mind
The time horizon of the SIP investments is the key to earning higher returns in the long run. The investments must be long-term, ideally more than five years, moving over a few market cycles. In fact, in volatile market conditions, the rupee cost averaging works best in SIP as investors get more units on the investments when the markets correct and lower units when the markets rise.

Though SIP is one of the best ways of en.alamrany to reduce the equity market risk, investors must check whether it is suitable for them at all times. Jain says SIP is good for those new investors who do not want to take any risk but want to invest in the equity market. “But if you have a lumpsum and can invest for the long-term, then the lumpsum investment will help you to create a larger corpus because of compounding for a longer period,” he says.

If you are looking to time the market, then SIP is not the option for you. Damodaran says in a rising market, immediately followed by a falling market, the short-term returns in equity schemes will not be encouraging and there will always be a return-expectation gap. In fact, starting a SIP at the top of the market immediately after the next slump may lead to bad SIP and investors may be tempted to stop the SIP or redeem the money. And that will be a sure way of losing your hard-earned money.

Investors must look at the consistency of the scheme before en.alamrany, as a top-performing scheme may not always remain a star performer. Investing in index funds is the safest option when taking the SIP route as the expenses will be lower than an actively managed fund and the SIP returns will mirror the index returns.