SIP Is A Great Psychological Relief For Investors With Less Risk Appetite

SIP investment is of great psychological help. Investors inevitably try to time the market. When the market falls, they sell and stop investing. When it rises, they invest more. This is the opposite of what should be done. An SIP puts an end to all this by automating the process of investing regularly. It eliminates the mental load of deciding when to invest and leads to better returns. However, there are some other popular modes of investment too. Mutual funds offer various modes of investing that are designed to fulfil various needs. Even if you are new to mutual funds, it is not necessary to have a big amount for you to start investing in mutual funds. You can start your mutual fund investments with a small amount and keep on investing regularly till it steadily grows to a decent amount that may help you meet your financial goals in the future. Thus, while mutual funds offer various modes of investing, one should preferably consider his or her convenience while investing in mutual funds. For example, there is an option of lump sum or one time investment wherein if you have a big sum in your bank account and are looking to invest it in mutual funds at one go, then you can consider investing via lump sum mode. But beware as investing all your money at one point, may call for market risk. And so to reduce this risk, there is an option called SIP. As per SIP investment, you can instruct the mutual fund to buy units of the scheme in your folio by debiting a fixed amount from your bank account every month or quarter. But do not forget, that the balance money lying in your bank's savings account may continue to earn a lower rate of return. So what can be a better option, to increase returns on your money lying idle? Well, mutual funds offer an opportunity to invest regularly while providing an opportunity to earn better returns on your idle money, through STP or systematic transfer plan. STP is a mode of investing, where you initially park your entire sum in a less risky category of mutual fund such as a liquid scheme, and then systematically transfer money on a regular basis from the liquid scheme to an equity fund or any other mutual fund scheme of the same fund house. So, while you are able to invest your money on a regular basis, the liquid scheme provides you an opportunity to earn returns better than your bank's saving account.