SIPs: Saving in India up until a few years ago simply meant putting money into a fixed deposit (FD) or bank account. FDs are safe, low-risk, and pay stable interest, according to family elders. However, people’s perspectives have evolved. Investors are now more concerned about developing their money than just saving it. This change has led to a greater discussion about Systematic Investment Plans (SIPs) than FDs.
Investors today are more aware than ever before. They realise that just depending on FDs is not sufficient in an inflationary scenario. The demands of day-to-day living, the need for educating children, the aspiration of purchasing a home, and planning for retirement also demand better returns. This is why SIPs are now considered a shrewd investment choice.
Inflation has changed the investment trend
Inflation is the primary cause of the switch from FDs to SIPs. Bank FD interest rates frequently don’t keep up with inflation. The investor does not truly benefit in such a scenario. When inflation rises and an FD earns 6 or 7 per cent interest, the money’s real value starts to fall rather than increase. Investors in SIPs have come to understand that mutual funds can outperform inflation over time.
SIP offers an easy way for the average investor
The special thing about SIP is that it does not require a huge one-time investment. A large amount can be accumulated by investing a small amount every month. This is why working professionals, small business owners, and young investors are increasingly turning to SIP. It is easy to invest a fixed amount from your monthly salary.
The second benefit of SIP is that the effect of market fluctuations is gradually reduced. When the market is down, more units can be purchased at a cheaper rate, and when the market is up, the value of the investment goes up. This is known as the benefit of cost averaging, which is not available in FDs.
Young people’s mindset and the impact of digital platforms
Today’s youth are looking for smart investments, not just safe investments. Mobile apps and online platforms have made SIPs easier. There’s no need to wait in line at the bank to invest. SIPs are initiated in a few clicks, and the entire portfolio is displayed on the mobile device. This convenience makes SIPs more attractive than FDs.
In addition, social media, finance blogs, and YouTube channels have also increased awareness about investing. People now conduct their own research, ask questions, and make informed decisions. This is why SIPs are no longer just a tool for experts, but have become an investment option for the common man.
The Safety of FDs vs. the Prospects of SIPs
Indeed, FDs haven’t completely disappeared. For those who are risk-averse or need to keep their money safe for a short period of time, FDs are still the right choice. However, investors with long-term goals are finding SIPs more preferable. SIPs do involve market-related risk, but with the right timing and patience, this risk can turn into profit.
People are now also realising that avoiding risk completely isn’t always the right approach. Wise risk can strengthen the future. This thinking is fueling the shift from fixed deposits to SIPs.
Changing Lifestyles and Growing Needs
Today’s lifestyles have changed significantly. Education has become expensive, healthcare costs have risen, and life after retirement has become longer. In such a situation, relying solely on fixed deposits makes it difficult to secure a future. SIPs give investors the assurance that their money can grow over time and help them achieve larger goals.
What will be the investment trend in the future?
Mutual fund returns aren’t one-size-fits-all.
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SIPs are measured using XIRR, lump-sum with CAGR.
Understanding how your investments grow helps you plan smarter and stay confident.
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As investors’ understanding and knowledge are increasing, it is clear that the scope of SIPs will expand further in the future. While fixed deposits will continue to hold their place, SIPs are gradually becoming the primary investment vehicle. People are now beginning to understand the difference between saving and investing, and this shift is shaping the way Indians invest their money.
Disclaimer: This article is for general information purposes only. Please assess your financial situation and risk appetite before investing. SIPs and other investment options involve market risk, so it’s advisable to consult a financial advisor before investing.
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