You may know that investing in mutual funds through a SIP is a good idea, but you need to learn why before you can confidently begin investing.

7 Reasons why women should invest in a SIP

You may have noticed that every time a conversation about investing comes up, the words ‘mutual funds’ and ‘SIP’ follow. At this point, it’s essential to understand that a SIP (Systematic Investment Plan) is simply a method or a way to invest in mutual funds and not a separate investment class altogether. There are two basic ways of investing in a mutual fund – first, by making a one-time lump sum amount; and second, by making monthly payments through a SIP. 

If you’re wondering why so many people swear by SIPs and why you as a woman should invest in one, here are 6 benefits that make a solid case for SIP mutual fund investments. 

1. It allows you to start with what you have

Have you ever hesitated to invest because you didn’t think you had enough money? A major benefit of a SIP is that you can start with a tiny amount – even as little as Rs 500 every month. It does away with this misconception that only older people who have a lot of wealth can invest. You can invest in small amounts regularly. In fact, a SIP is an excellent way to build your own wealth in the long run. 

2. It enables you to make better decisions later 

If you stayed away from investing because you are afraid of making wrong decisions and losing your money, or because you’ve always heard that women can’t invest, a SIP mutual fund investment is for you. It’s a safe way to enter the world of investing and allows you to take your time to get oriented to it. It also allows you to gain the knowledge and confidence you need when it comes to investing and do away with various sexist myths. 

Related: A woman’s guide to managing her finances at every stage of life

3. It develops the habit of disciplined investing

Since you need to invest a fixed amount every month towards your SIP mutual fund, it inculcates a sense of financial discipline. It helps you stick to your monthly budget and not make any impulse purchases. It’s a financial commitment that you’re making to your future self, and investing in mutual funds through SIP helps you realise that financial responsibility. So, the next time you feel like buying an expensive birthday gift for a friend or a designer dress for yourself, your SIP investment will help you remember what your priorities are. 

4. It enhances your financial independence 

As a woman, you know how important financial independence is to live life on your terms. When you start investing in a SIP, you’re a step closer to building, maintaining, and enhancing your financial independence. With goal-based SIP investing, you can work towards certain financial goals such as building an emergency fund, buying a car, or planning your first international trip. If you start early, it can also help you pay for your wedding so that your parents don’t have to worry about it. 

5. It shields you from market fluctuations

Have you seen men who seemed obsessed with the market and need hourly updates? Well, when you invest in mutual funds through a SIP, you don’t need to be one of them. You can continue indulging in your hobbies. In addition to the fact that your SIP is managed by a fund manager, another benefit is rupee cost averaging. What this means is that when the market price of shares goes down, more units are purchased. This helps to spread risk and deal with market volatility. 

Related: How to invest in stocks like a pro

6. It provides higher returns than an FD

If most of your money is parked in fixed deposits (FDs), you’re not alone. A majority of Indian women are in the same boat because they are more risk-averse than men when it comes to investing. But while FDs are low-risk, they are also a low-return investment. SIP mutual funds, on the other hand, provide higher returns. And if you opt to invest in debt mutual funds, they too are low-risk so that advantage remains.

7. It is highly liquid 

The minimum investment term of most fund houses is 6 months, however, experts recommended investing for 5 to 10 years to see any real gain. Despite the investment term that you select, you don't have to worry about your money being blocked until maturity. You can withdraw money from your SIP at any time even if your investment term is not over. You may have to bear a 1% exit load if you withdraw before one year. However, there is no charge or penalty if you want to stop or pause your SIP. This easy and quick accessibility is one of the biggest edges that SIP has over other investments. You also have the option of investing in liquid mutual funds that have a low maturity period of 91 days or less. 

Before you start investing in a SIP, you need to understand the different types of mutual funds and look up the best mutual funds. Then, a small amount of money and a goal for your future are enough to get you started. What investment options can create a regular income for women?

Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas.