Today, youngsters are highly aware of their financial responsibilities. They know the significance of saving and wealth building. But many of them shy away from investments. The main reason for this is the slightly complex procedure some schemes follow. This is when a Systematic Investment Plan is valid. It is a systematic yet simplistic investment scheme. The investor deposits small sums at regular intervals for a fixed period.
SIPs are hassle-free and hence, a convenient investment option. Here are other reasons why such a scheme works best:
- Easy to understand
SIPs follow a simple investment structure. You only need to set a sum amount and an interval at which you will deposit it. Thus, it is easy to understand and follow through.
- Safe
A SIP Investment is the safest investment method. It is managed and controlled by professional fund managers. This empowers you to continue your investment journey without any worries. Plus, it follows rupee cost averaging. It is a process that determines the average high and low amount based on your investment duration.
- Redeemability
Unlike a few Deposit schemes, SIPs permit termination and withdrawals. It grants full redeemability of the invested amount. For example, you have been investing in a SIP for some time now. You wish to discontinue the plan and redeem your money. Here, the fund credits the accumulated amount in your Savings Account. If you do not want it right away, you can keep the invested amount until you decide. In either case, the plan offers flexibility like no other.
- Tax-saving
A significant chunk of our investments gets deducted by taxation once we start investing. But in the case of SIP Plans, we do not face this situation. As per section 80C of the Income Tax Act, it is exempt from any taxes. Hence, it is an excellent option for youngsters new to investments. It allows them to kick-start their investment journey worry-free.
- Deposit amount modification
Investors can change their Fixed Deposit amounts. The SIP calculator gets used to make these calculations. But it is a slightly lengthy process. Hence, if you wish to change the amount, apply for another SIP. It saves time.
- Accessibility
Nowadays, SIPs have become accessible than ever. The Mutual Fund app and portals offer them without any complex requirements. Only upload relevant documents along with a bank statement. After this, you start your SIP. But before beginning this process, make sure that you choose a reliable online medium.