What is Systematic Investment Plan (SIP)?
Systematic Investment Plan (SIP) is a wealth creation tool, which allows investors to invest a fixed predetermined amount on a regular basis (weekly, monthly, quarterly, etc.) in a mutual fund scheme. SIP acts quite like a recurring deposit.
The main difference is that in SIP, the amount you choose is invested in a mutual fund scheme of your choice on a regularly specified date for a predetermined period, and not in bank deposits, as with recurring deposits. it happens.
Investments through SIPs in mutual funds are therefore subject to market risk. The minimum amount that you can invest through SIP will vary from one fund house to another, from one scheme to another.
Given its nature of the investment, SIP helps provide financial discipline and develops regular savings habits. This allows individuals to invest regularly without wrestling with market sentiment, index levels, etc.
For example, you have opted for the mutual fund scheme, where you have to put a fixed amount every month. Not only will you have to give time to do this, but you may also worry about market conditions and possibly think about postponing your investment. SIP puts an end to all these concerns. Without any effort from your part, the money is invested in a scheme at regular intervals.
Benefits of Systematic Investment Plan (SIP)
A systematic investment plan is a method of creating an investment portfolio with a small sip investment in mutual funds at regular intervals. Many investors choose this route to enter the financial markets and profit from compounding returns is the best way. There are many advantages to investing in SIP. Here’s what they are:
Disciplined Savings: For any successful investment, discipline is the essence. By investing through SIP, you are committed to saving regularly, and every investment takes you one step closer to reaching your financial objectives.
Convenience: Investing through SIP is a hassle-free process. You can instruct your bank for auto-debit facility from your account. You can also go to the website of the fund house you are interested in and click on the link of SIP registration link/tab.
The average cost of Rs: If you choose to invest a certain amount every month through SIP, you will see that more units or stocks are bought when the investment price is low. This reduces the average cost of purchasing a financial asset over time.
Benefits of Compounding: To generate funds, the key is to start investing early and regularly. A small portion of the money invested regularly through SIP can grow to a much larger amount. Through the power of compounding, your interest earns interest, allowing you to obtain a substantial amount of money.
No need for time in the market: Knowing when the right time to invest in the market is can be big. It is difficult to predict whether the market will be at its peak or low point. Investing through SIP saves you time from the market. While SIP is not free from market volatility, you should not worry about market movements.
How to start SIP in 2020?
Investing money is an art; If done correctly it can work wonders. Now that you know the top SIP schemes then you should know how to invest in it. We have mentioned the steps to invest in SIP below:
1.) Analyze Your Financial Goals
Choose a SIP investment that meets your financial goals. For example, if your goal is short term (if you want to buy a car in the next 2 years), then you should invest in debt mutual funds. And, if your goal is long-term (like retirement planning) then prefer to invest in equity mutual funds.
2.) Select the time period of investment
This will ensure that you invest the right amount of money for the right time.
3.) Decide the amount you want to invest monthly
As SIP is a monthly investment, you should choose an amount that you will be able to invest monthly without fail. You can also calculate the appropriate amount according to your goal using sip calculator or SIP return calculator.
4.) Select the best SIP plan
Make a wise investment choice by consulting a financial advisor or choosing the best SIP plans offered by various online investment platforms.
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