SIP or Systematic Investment Plan is one of the most searched term on Google. Many Investors those who have already made SIP investments in mutual funds are often confused about SIPs. So here is a quick guide to SIPs and how you can use them to create a wealth over a long period to achieve your longterm financial goals.
What is an SIP ?
An SIP or a Systematic Investment Plan allows an investor to invest a fixed amount regularly in a mutual fund scheme.
Why should you do SIP ?
One,it imparts financial discipline to your life. Two,it helps you to invest regularly without wrestling with market mood, index level etc. For example if you are supposed to a fixed amount every month in a mutual fund scheme, you need to find time to do it. When you have the time, you might be worried about market conditions and think of postponing your investments. Or you might be thinking of investing more if your mood is optimistic. SIP puts an end to all these predicaments. The money is automatically invested regularly in a scheme without any effort on your part.
What are the other benefits of SIPs?
SIPs helps you to average your purchase cost and maximise returns. When you invest regularly over a period irrespective of the market conditions, you would get more units when is the market is low and less units when the market is high. This averages out the purchase cost of your mutual fund units.
Another benefit called eighth wonder of the world by some, is the Power of Compounding. When you invest over a long period and earn returns on the returns earned by your investment, your money would start compounding. This helps you to build a large corpus that help you to achieve your longterm financial goals with regular small investments.
How much do I need to start a SIP?
You can start investing in mutual fund scheme via SIP with a minimum of 500 ₹.
Can I customise my SIP ?
Yes, you can. Though the most popular SIP is investing a fixed amount every month, investors can customise the way they put money on SIPs. Many fund houses allow investors to invest monthly, bi-monthly and forenightly, according to their convenience.
Apart from this, Step-ups SIPs allow investors to increase the SIP amount periodically. "Alert SIP" is another form of regular Systematic Investment Plan which send an alert to the investor to buy more when the markets are down.
Incase of "Perpetual SIPs", investors don't have to choose the end date of SIP. Once the goal is met, the investors can stop the SIP by sending a written communication to the fund house.
I will upload "How to start Systematic Investment Plan (SIP) online?" in my next post.
Thank you !! Happy Investing !!
