{"id":11685,"date":"2020-09-14T13:23:20","date_gmt":"2020-09-14T13:23:20","guid":{"rendered":"\/blog\/?p=11685"},"modified":"2025-09-01T12:24:03","modified_gmt":"2025-09-01T12:24:03","slug":"why-are-sips-an-ideal-choice-for-the-first-time-investor","status":"publish","type":"post","link":"https:\/\/www.tatacapitalmoneyfy.com\/blog\/sip\/why-are-sips-an-ideal-choice-for-the-first-time-investor\/","title":{"rendered":"Why are SIPs an Ideal Choice for the First-time Investor?"},"content":{"rendered":"\n

While we are raised to abide\nby the principle that investment is good, we are not always pointed in the\nright direction in terms of investments. This is why picking the right tool\nbecomes particularly tricky for first-time investors  considering the many financial options there\nare in the market. However, for quite a while now, SIPs have firmly established\ntheir place as the ideal first-time investment of choice for new investors\naround the country. <\/p>\n\n\n\n

So, what lies behind the success of SIP as a first-time investor\u2019s ideal tool? How can you make the most of it? Here\u2019s all you need to know.<\/p>\n\n\n\n

What are SIPs?<\/strong> <\/h2>\n\n\n\n

To start with, let us review how SIPs are defined. SIP stands for Systematic Investment Plan<\/a> is a type of facility whereby investors can make equal and regular payments in mutual funds and other schemes. Often mistaken for products, SIPs are essentially plans that encourage disciplined payments and investments over a long period of time instead of making large lump sum payments in one go. The investor can make his or her selection of SIPs and exercise control over factors such as the amount and frequency of the regular investments.<\/p>\n\n\n\n

Why are SIPs Ideal for New Investors?<\/strong><\/h2>\n\n\n\n

Apart from the ease and convenience they offer, here are the reasons why investing in mutual funds<\/a> through SIPs is the perfect choice for first-time investors:<\/p>\n\n\n\n

1. They Encourage Financial Discipline <\/h3>\n\n\n\n

Most\nfirst-time investors also tend to be first-time employees, earning their first\nsalaries and developing some of their first essential financial habits. By\ninvesting in SIPs , these first-time investors can by default develop a disciplined\nfinancial habit that will serve them for years to come – saving. Over time, not\nonly do these saving habits help first-time investors prepare for the future\nbut also aid in building large corpuses for larger, more important goals.<\/p>\n\n\n\n

Additional Read:<\/strong> Understanding the Power of Systematic Investment Plan<\/a><\/p>\n\n\n\n

\"Mutual<\/figure>\n\n\n\n

2. They Generate Wealth from Income <\/h3>\n\n\n\n

SIPs are also deemed an effective investment\ntool because you can invest a part of your income and make the most of the\npower of compounding. Compounding refers to the process of earning on the\ninterest accumulated by reinvesting the interest earned along with the\ninvestment amount. For an investment made early on in your career, as is the\ncase for most first-time investors, this can lead to an exponential growth over\nthe years and help you generate substantial wealth.<\/p>\n\n\n\n

3. They Help You Meet Financial Goals <\/h3>\n\n\n\n

SIPs do not come with a lock-in period. This\nmeans that whether you have short term goals such as purchasing a car, or long\nterm goals such as saving for retirement, you can help save for either with the\nhelp of an SIP investment suited for the time requirements of your goals.\nMoreover, in order to suit your financial goals, you can invest as much as is\nconvenient for you at a time, have multiple SIPs for the purpose, and even\nwithdraw or stop the SIPs as desired.<\/p>\n\n\n\n

4. Rupee Cost Averaging <\/h3>\n\n\n\n

For first-time investors,\nbraving the fluctuations of the market can be a difficult task. When the market\nconditions get choppy, it can get tricky for new investors to gauge their next\ninvestment move. However, by investing in an SIP even first-time investors\ncan benefit from the principle of Rupee Cost Averaging – the investment\ntechnique of regularly investing across market (upmarket as well as\ndownmarket). This helps your investment stay protected from the volatility of\nthe market even without your intervention.<\/p>\n\n\n\n

5. They Serve as Emergency Funds<\/h3>\n\n\n\n

While SIPs serve as the ideal tool for financial discipline, they can also make for the perfect emergency funds for first-time investors. Over the course of time, as your regular investments grow, you can accumulate enough corpus in your SIPs to help you meet any unexpected expenses. Moreover, with the flexibility SIPs offer, you can withdraw your SIP amount partially or in full without experiencing a loss of return on your investment.<\/p>\n\n\n\n

Additional Read:<\/strong> How and where to keep an Emergency Fund?<\/a><\/p>\n\n\n\n

6. Help You Save Taxes <\/h3>\n\n\n\n

There\nare a variety of instruments in the market that can help you save taxes every\nyear, but require you to settle for quite modest returns. An easy resolution to\nthis dilemma can be achieved by investing in specific types of SIPs that are\ngeared towards both tax saving as well as higher income generation. A common\nexample of such SIPs are the Equity-Linked Savings Schemes, or ELSS. They come\nwith short lock-in periods, offer considerable diversification and most\nimportantly, are eligible for tax deductions of up to Rs 1.5 lakhs under\nSection 80C.<\/p>\n\n\n\n

Conclusion<\/strong><\/h2>\n\n\n\n

As beneficial as SIPs are, it is essential for investors to get\nstarted as early as possible to reap maximum rewards. Hence, for first-time\ninvestors, SIPs present\nan ideal investment opportunity with the potential to grow for years to come\nand help them generate wealth. In particular, for most investment beginners, an\nideal option would be to opt for a reliable mutual fund SIP.<\/p>\n\n\n\n

Tata Capital offers the opportunity to invest in several such mutual funds SIP<\/a> across large cap, mid cap, small cap according to your specific requirements. To make SIP investments even easier, you can try out Moneyfy app from Tata Capital that offers a convenient method of browsing and investing in a number of suitable mutual funds.<\/p>\n\n\n\n

Download Moneyfy App<\/a><\/div>\n","protected":false},"excerpt":{"rendered":"

While we are raised to abide by the principle that investment is good, we are not always pointed in the right direction in terms of investments. <\/p>\n

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