Systematic Investment Plan
Systematic Investment Plan is also named as SIP essentially permits to invest a fixed amount, regularly into the funds of your choice. Under SIP category, a regular deduction is made from your savings account, monthly and channelized towards the fund/s you personally choose for investment.
The basic advantages
- Invest small amounts in fixed interval
- Choose an auto payment option
- Absorb market changes
- Fix a budget and spend
SIP has recently been liked by the salaried section of the society. There are not too many investment tactics but choosing the most befitting one is the challenge. Investing money mindfully into mutual funds is normally learnt over time. The money contributed can a lump sum amount or fixed investments over a span of time known as SIP.
How does Systematic Investment Plan work?
From the longest time, the security market is exceptionally volatile and it’s very difficult to predict numbers in the Indian financial markets. Most essentially, in the developing economies because volatility is at its peak. So obviously, no hit and trial method works there. Such volatility leads to investment insecurity for individuals who like to invest directly. Even the market experts fail to make accurate predictions sometimes. This is when rupee cost averaging enters the scene and SIPs become popular.
SIP is as simple as regular pumping of money for investments. Basically one preset amount is deducted from your account every month to be invested in funds on a fixed date. So, in nutshell you do not govern investments directly, the money goes into funds of value. Hence, you make investments leaving your pocket unaffected and in an easy-to-understand-and-operate model for most.
A Systematic Investment Plan is an intelligent and easy mode of putting money into mutual funds without investing too much time and mind into it. A few numbers are given out basis the current market rate (NAV or net asset value) on the same day. SIP ensures you to pool in pre- determined intervals (weekly, monthly, and quarterly), a predetermined sum of money. SIP is quite a structured approach towards investments and grows in you the knack of saving for future.
Advantages of SIP
To perfectly understand the concept of SIP, two more concepts are needed to be understood well. Rupee Cost Averaging and Power of Compounding, in addition with Discipline and Regularity. Every time money is invested, two more units of the mutual fund scheme at the market rate is added to the account. Therefore. More units are purchased at different prices and different values.
Since, deciding upon the right time to invest in the market is difficult, Infact even the entry time is tricky, hence rupee-cost averaging helps you to take concrete decisions. As a routine investor, your fixed amount will attract more units when the price is low and lesser when the price is high. During the changing conditions, an average cost will be reached at.
Power of Compounding
The concept of power of compounding is quite clear. The earlier you start investing, more are the chances for you to earn.
Allocated Benefits of SIP
Disciplined Saving – Just make it a point to invest regularly without any misses. Disciplined investments is a must to maintain your stream of returns on routine basis. With each payment you commit towards your financial goal.
Flexibility – SIP grants you the flexibility to invest with a long term viewpoint and hence can be stopped at any point in time. One can withdraw plans whenever they like along with the amount invested in the plan.
Long-Term Returns– Rupee-cost averaging and the power of compounding can make SIP establish itself as the best investment plan, attracting returns over a long stretch.
SIP investments are the best way to issue a standing instruction to your bank to facilitate auto-debits from your savings account. They have proven themselves to be the best methodology to indulge in material plans. The talking about SIPs has gone up owing to the last few initiatives by the Govt. The utility of SIP investments have come to the fore.