Many of us just save. We don't accumulate. Even If we accumulate, though we are concerned about returns but do not think about Wealth Creation
Mutual Funds with established track record of many years have the option that covers many of known and unknown worries of the investors. Some features of SIP are as under:
Ease of Transaction
One time instruction about amount to be invested, frequency of investment and how long you wish to save.
More Beneficial in volatile Markets
Many investors try to catch the bottom and exit at peaks, which is very hard to catch. In SIP, every dip gets you more units and every rise increases the valuation of your holdings.
Flexibility of entry and exit
With open-ended nature of mutual funds, SIP satrategy provides the investor to buy additional or exit (in part or full) at any point in time.
Best way to time the market
You don't have to worry about the market levels, as funds are automatically invested at every level. Thus, getting you averaging of market valuations.
Forced Habit of Saving
We generally tend to spend our savings in some or other life style expenses. Being an automated process and attachment to goal, makes SIP a forced habit of savings. Results of the same are visible when goal is achieved.
As per current tax law, any investment held for more then 1 year in equities fund is not liable for long term capital gain tax. Thus, all long term profits from SIP in Equity Funds are tax Free.
Vehicle for every financial goal
We should do a reverse calculation for every financial goal like - child's marriage or education, self retirement or even vacation planning . Depanding upon the goal value, SIP amount should be decided and continued till the goal year.