While retail investors have embraced systematic investment plans (SIP) with open arms to invest in mutual funds, it’s time for corporates to adopt it as a part of their business strategy. For corporates, SIPs can turn out to be like loyal employees that help grow business profits and help tide a crisis. In other words, they should treat SIPs as an expenditure on employees. Here’s why.
Boost Business Profits
A trusted employee helps businesses grow profits and SIPs are no different. Even a modest SIP of ₹ 1 lakh every month in an equity mutual fund offering 15% annualised returns for 5 years can help build a corpus of more than ₹ 89 lakhs (see image 1).
When a trusted employee sticks with an organisation for a long period, he/she can generate more profits. The case is the same for SIP in business. If a company continues SIPs for an extended period, profits are higher due to compounding. For instance, if a SIP of ₹ 1 lakh in an equity fund offering 15% annualised returns is continued for 10 years, the corpus grows to over ₹ 2 crores (see image 2).
Be Emergency Ready
Emergencies often arrive unannounced and can catch organisations off guard. However, along with decision-makers, employees play a crucial role in tackling and overcoming the situation. When entities invest business money through SIPs, they provide themselves with a safety net in case of cash crunch due to any reason, such as delayed payments from clients, failed projects, etc.
Entities can redeem anytime they want to. Upon placing a redemption request, the money is credited in the bank account within 2-3 business days.
Guard Against Market Volatility
Businesses face several risks, both internally and externally. A prudent way to mitigate the risk is to ensure all stakeholders and employees are on the same page. SIPs act in a similar manner. They are the right antidote to market volatility.
Markets are on tenterhooks now due to domestic and geopolitical factors. However, SIPs help guard against this volatility as they allow one to remain invested across market highs and lows, which ultimately reduces investment risk.
SIPs work on the principle of rupee cost averaging, which means they help accumulate more units when markets are down and vice versa. Suppose an organisation invests ₹ 1 lakh in a mutual fund whose NAV is 100. You will get 1,000 units of the fund (1 lakh/100). If the market tanks and the NAV comes down to 50, you will get 2,000 units of the fund (1 lakh/50).
Upon redemption, you will have units accumulated during market upswing and downswing, which ultimately eases out volatility associated with mutual fund investments.
Summing Up
As evident, treating SIPs as employees and investing in them spells several benefits for organisations. They are flexible, offer support in times of need and help navigate challenging times. If you are looking forward to mutual fund options for SIPs, Shootih can be your partner and guide in this journey.
India’s first Business Wealth Management platform, Shootih lets you invest in a range of funds as per your choice and invest idle business cash for growth. Book a call with our product expert to know more.
Disclaimer: Mutual fund investments are subject to market risks, please read all scheme-related documents carefully
The content of this blog is not intended to serve any professional advice or guidance and Shootih takes no responsibility or liability in whatsoever manner for any investment decisions made by the readers of this blog or other blogs. Readers should seek independent professional advice before making any investment decision based on the information provided on this website.
