Mutual Funds: Five reasons to start investing early via SIP
Jan 24, 2023, 10:24 am
3 min read
The earlier you start investing, the higher your chances of achieving higher returns.
But then you’d argue “I don’t have enough money to invest.” To counter this, you have the facility of investing through Systematic Investment Plan (SIP), which allows you to invest in smaller amounts starting from Rs 500.
Read on to know in what ways investing early via SIP can benefit you.
What is a Systematic Investment Plan?
SIP is an investment tool offered by mutual funds that allow investors to invest in small amounts at regular intervals. In SIP, a predetermined amount, every month on a fixed date, is debited from your savings account and electronically transferred to the fund.
You get the early advantage of compounding
Investing in mutual funds via SIP for the long term can give you the benefit of compounding.
Through compounding, you can turn your small monthly SIP investments into an exponentially large corpus by earning returns over your returns.
Someone starting a SIP at age 20 is going to benefit from compounding more than those starting at age 30, provided that they keep investing throughout.
Improves your spending habits
By investing early in mutual funds via SIP, you are more likely to learn the healthy financial habit of spending your money wisely.
Because through SIP your pre-decided investment value automatically gets deducted from your bank account, leaving you with the amount you need to spend and not want to spend.
This will help you keep your spending habits in check.
You’ll have more time to make up for loses
Investing isn’t a cakewalk; you are bound to make mistakes.
But if you start early, you will have plenty of time to correct any beginner’s mistakes and recover from losses.
You will have more time to learn to handle the risks of investing, recover from your slips and miscalculations, and experiment with your investment strategies to better suit your financial goals.
You can meet your financial goals sooner
Someone who starts investing later on in their life will comparatively not have enough time to let their money grow.
So, starting to invest early in your twenties can help you reach your financial goals sooner than those who start late.
When you start young, you will also have enough money to enjoy your golden years as opposed to just keeping it for retirement.
You’ll be better prepared for adversities
Our financial health, just like our physical and mental health, does not remain stable all the time.
At some point, you may have to go through certain financial adversities.
But by investing early, you will be better prepared to deal with such low phases.
The best time to prepare for any potential adversities is the time before it knocks on your door.
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