Prof. Vinny Arora Explains the Best Way to Invest: Direct Investing in Stocks or SIPs?

Indian stock market in the recent past, especially after COVID-19, has been in great shape and given some great returns. People are now motivated to invest and grow money. The question is: Should you invest directly in stocks or go for a Systematic Investment Plan? Here's what Prof. Vinny Arora, the finance expert, advises you on:

Understanding SIP and Direct Stock Investments

As Professor Vinny Arora said, SIP is just a way to invest in the stock market. Under SIP, you commit a fixed amount regularly to mutual funds, which then invest in the stocks. Now, if you wish to invest directly in individual stocks like Infosys, Reliance, or TCS, then do that too.

However, for most retail investors, particularly those with jobs and who cannot spare hours studying the stock market, mutual funds are relatively safer and easier. As a matter of fact, equity mutual funds will be the best option since they pool money from several investors and are professionally managed with research and choice of stocks.

Power of SIP: Consistent, Long-Term Investing

SIP is one of the best modes to invest in mutual funds. Using the SIP mode, you can invest a fixed sum every month in your desired fund. The key benefit of SIP is that it helps in long-term and disciplined investing. In SIP, you do not have to rely on market timing, and over time, your investment grows steadily.

You can also boost your SIP with a "step-up" clause. That means you step up the SIP amount in line with your increasing income. This small change can bring a huge difference in your wealth over a period due to compounding effects.

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So, if you plan to create wealth in the long term without the anxiety of picking individual stocks, SIPs in equity mutual funds are the smart and practical choice. Start small, increase gradually, and watch your money grow into a secure financial future.