How is SIP an Excellent Way for Women to Build Wealth?

Today, it is common to see women in professions which once were considered male dominated. However, many women still are hesitant about managing investments. For this, many depend on their husband or father. A major reason for this is the long run stereotypical gender bias, where managing finances is attributed to be a man’s domain. Many women, unfortunately, grow up with such intensely ingrained stereotypes, which makes it tough for them to enter the realm of investments. While it is a benefit that a male member in the family is financially adept, it is doubly advantageous when a woman too is financially aware. A financially literate and wise woman can easily steer the whole household towards financial stability and prosperity. 

Generating returns from your investments has no link with your gender. After all, investments in any avenue, may it be mutual funds or fixed deposits, do not know if you are a female or male. Thus, for a woman, the initial step is to erase the thought from her mind that you cannot handle investments. Today, there are many earning handsome salaries, which itself shows their capability of managing money. Alongside, there are even a lot of cases of working mothers, who are not just managing their household but also their professional roles. What is more, our finance minister – Nirmala Sitharaman is a woman. Women like Gita Gopinath, Aruna Jayanthi, Indra Nooyi, Kiran Mazumdar, Kalpana Morparia, are highly acclaimed in their respective fields. It shows women are geared to manage various demanding roles, which include financial responsibilities.  

Next, you must enlighten yourself about investing. Investing, at its core, is all linked with discipline and patience. You must keep repeating the correct actions for a long time-period to build a huge corpus of wealth. SIP (Systematic Investment Plan) is one of the investment routes that can help you here. Listed below are reasons to opt for SIP: 

Inculcates the habit of saving and financial discipline

SIP simplifies the task of wealth creation because it is a planned form of investment on autopilot mode. Once you select the mutual fund scheme based upon your goals, all you require doing is setting the auto debit instruction from your savings bank account to the specific mutual fund on a predetermined date. In this way, you can easily allocate a predetermined amount of funds every month towards your financial goal for corpus generation. 

Such automatic deductions from your account ensure regular investment and even save you from being swayed by twin emotions of fear and greed. Regular investment even assists in instilling financial discipline as you are propelled to restrict your avoidable expenditures to mitigate your SIP commitments. 

Requires smaller investible fund

Usually, fresh lump sum investment in most equity funds requires a minimum investment equaling Rs 5,000 while the additional investment can be Rs 1,000. However, if you invest in a mutual fund through SIP, the minimum investment can be as low as Rs 500 in the case of ELSS and Rs 1,000 for other mutual funds. Thus, SIP permits you to begin your mutual fund investment journey with an extremely small amount without the need to wait for the accumulation of a bigger investible amount.

Avail the benefit of compounding

Compounding is when your interest generated from your investments stays invested with your capital, which begins to yield returns on its own. It assists to generate additional earnings over a period. As SIP can be started with a little investible amount, you can begin with your mutual fund investment journey through SIP by investing small amounts per month to avail the benefit of compounding. For instance, a small SIP of Rs 2,000 per month in equity mutual fund at 15 percent p.a. for 30 years can yield Rs 1.38 crore returns. 

Activates rupee cost averaging 

As the investment amount via SIP stays the same every installment, the unit that you purchase differs based upon the market levels. Higher units are bought when market prices are declining, and fewer units are bought when the market prices are on the rise. SIP helps in automatically averaging the investment cost. For the long-term investment horizon, mutual fund investment through SIP allows you to exploit scenarios of market corrections by purchasing a higher number of units at considerably lower NAVs (net asset value).

Removes the requirement for market timing

Timing your investment requires a sound understanding of fundamental analysis, macroeconomic situations, technical analysis, policy impacts, geopolitical trends, etc. In case you are an amateur investor, tracking such things may not be simple. Here is where investment in mutual funds through SIP can help. Automatic and regular investment in SIP saves you from the predicament of timing your mutual fund investments based on market volatilities.