Systematic investment plans (SIPs) are a real boon. They allow you to invest in mutual funds and other investment schemes through smaller, periodic payments. This makes investments more accessible as you no longer require large amounts of money to begin investing.
SIPs also automate the investment process. Once you start an SIP, the money will automatically be debited from your account at regular intervals. Moreover, your investments are handled by an expert fund manager. This makes SIPs perfect for novice investors or those who do not have time to track the market and make complex investment decisions.
These features also make SIPs favourable for the crypto industry. Many investment companies now offer SIPs that help customers invest in the burgeoning cryptocurrency market. It allows investors to tap into this lucrative asset class, even if they lack the time, expertise, or capital to make large crypto trades on their own.
Let’s look at what crypto SIPs are and how they work.
Cryptocurrency SIPs
Crypto SIPs work just like their traditional counterparts. Instead of making one large purchase, SIPs allow you to invest in the crypto market through smaller payments over an extended period. This also helps you average out the buying price of the token and reduce the impact of volatility.
Since the investment amount remains the same, you buy fewer tokens when the prices are rising and more tokens when the prices are falling. This allows investors to counter the volatility in the market and benefit from it.
Benefits of cryptocurrency SIPs
The first and most obvious benefit of a crypto SIP is that you can start as small as you like and decide the frequency too. As long as your account has enough balance, everything will happen on its own.
Another significant benefit of a crypto SIP is that since you are playing the rupee-cost averaging strategy — your emotions do not guide your investment decisions. Neither greed nor fear can alter the amount you invest or the time of purchase.
Plus, unlike direct crypto trading, you can set these investments on autopilot mode and forget about it. You can do this for multiple tokens and easily diversify your portfolio.
SIPs can also shield you from making impulsive decisions during market downturns. They are a form of forced investment and help you stay committed to an asset while others start panic selling. Historically, the crypto market has always worked in cycles of crashes and booms.
As such, cryptocurrencies usually meet and exceed the price point they fell from, and you would be grateful you did not give in to fear and sell your assets. Moreover, you would be able to buy more tokens when the price is low, resulting in higher profits when the prices rebound and begin to rally.
However, these benefits can play out in your favour only if you do not lose sight of basics like:
-Staying invested for the long run
-Starting with small sums and increasing it gradually
-Keeping a tab on your performance and adjusting the SIP accordingly
Various exchanges in India offer crypto SIPs; you can start investing in Bitcoin or Ether with as little as Rs100. You can set the investment frequency to daily, weekly, and monthly. Experts even suggest allocating 80–90 percent of your crypto investment budget to SIPs.
However, choosing the correct tokens for your SIP is also essential. Tokens backed by solid fundamentals and that offer plenty of use cases are bound to do well in the long run. Large-cap tokens such as Bitcoin and Ether are also an excellent option — they are comparatively less volatile and backed by large-scale investors.
