Systematic Investment Plan
Systematic Investment Plan or SIP is a systematic way to invest your fixed amount of money in a specified Mutual Fund. It allows you to invest your money at a regular interval (weekly, monthly or quarterly basis). This investment method works similar to the investment in Recurring Deposit, where we deposit a fixed amount of money in a bank.
SIP is a planned approach towards investments and helps you inculcate the habit of saving and building wealth for the future. SIP’s flexible nature empowers the investors that they may stop investing and may increase or decrease the investment amount anytime.
Benefits of Systematic Investment Plan (SIP)
SIP enforces a disciplined approach towards investing. It infuses regular saving habits which we all probably learned during our childhood days when we used to maintain a piggy bank. Investment through SIP is a good choice for those investors who do not possess enough understanding of financial markets. SIP has brought mutual funds within the reach of an average person as it enables even those with low or tight budgets to invest Rs 500 or Rs 1,000 on a regular basis in place of making a one-time investment. These are the key benefits through SIP investment:
1. Savings for future
2. Flexible Investment Options
3. Long-Term Gains
How SIP works?
The investors play an important role in SIP. Here are few steps about how SIP works:
Open a SIP account: First, you have to open a SIP account. For this you must have your KYC details viz. identity proof, address proof and a photograph.
Investment Plan: Once your account is set up, next is to decide how much amount you want to invest and for how long period? SIP is an easy investment plan, where your money is auto-debited from your bank account and invested into a specified Mutual Fund Scheme.
Investment Technique: An investor will receive a number of units of mutual funds based on the amount invested by the investor. When the market price of shares fall, the investor benefits by purchasing more units; and is protected by-purchasing less when the price rises.Thus the average cost of a unit is always closer to the lower end making the investment profitable.
Investor Benefits: Every time you invest money, additional units of the scheme are purchased at the market rate and added to your account. Hence, units are bought at different rates and investors benefit from Rupee-Cost Averaging and the Power of Compounding.