Systematic Investing and Why You Should Invest
by Melissa Alves
Have you been putting off your savings? Maybe its for retirement, college education or any other financial needs. Well, systematic investing can put you on track if you've been putting off your savings. Systematic invest plans, also known as SIPs is a smart, hassle free way of investing your money in mutual funds that can be made weekly, monthly, quarterly, etc. Your money is taken out of your bank account and invested into a mutual fund. Every time you invest money, additional assets of the fund are purchased at the market rate and added to your account.
Systematic investing gives you many opportunities to take advantage of the market volatility by buying more shares when the price is lower and less when the price is higher. Other advantages of a systematic investment plan are dollar cost averaging, the power of compounding, investment discipline and dollar cost averaging. Dollar cost averaging allows your money to collect more units when the price is low and fewer when the price is high. Investments and returns are based on the power of compounding; it's best to start early. The sooner you start investing the more time your money has to grow. Albert Einstein once said, Compound Interest is the eighth wonder of the world, he who understands it, earns it, and he who doesnt, pays it. Due to dollar cost averaging and compounding, SIPs have the capability to deliver appealing returns over the long-term.
Why else should you start a systematic investment plan? It gives you convenience, flexibility and dollar cost averaging! Disciplined saving allows you to stay focused and put aside and maintain a weekly, monthly or even quarterly investment. With some flexibility and convenience, you can auto debit your investment from your savings account each month without any hassle. As your money gets invested over time at regular intervals market declines become opportunities for the long-term investor, as your investment buys more shares than if the price were to rise so overtime this may reduce the cost per share you pay.
Photo credit: 401k 2012 @ Flickr