What is Systematic Investment Plan?
Commonly known as SIP, it is an investment option which allows investors to invest in mutual funds. When investing through SIP, you do not need a large sum, since this plan allows you to invest smaller amounts over time, making it easier to invest while managing all other expenses.
Navigating the volatility of the stock market requires a thoughtful investment approach, and the Systematic Investment Plan (SIP) emerges as a strategic solution for individuals seeking to mitigate risks while pursuing returns. SIP offers a unique advantage by allowing investors to profit from both bullish and bearish market trends without the need to precisely time the market.
This investment strategy involves committing a predetermined amount of funds at regular intervals, providing a structured and stress-free approach to market participation. Through SIP, investors can explore market-linked funds offered by various financial entities, including mutual funds, insurance companies (ULIP), and financial institutions.
SIP Investment Advantages in a Nutshell
- Convenience: Hassle-free online investing with a one-time setup; your SIPs accumulate automatically.
- Financial Discipline: SIPs instil financial discipline through regular, forced savings without disrupting your lifestyle.
- Flexibility: Enjoy the freedom to adjust investment amounts at any time, providing unparalleled flexibility.
- Lower Risk: SIPs spread investments over time, reducing capital risk and enhancing resilience in volatile markets.
How SIP works
When you invest in an SIP, you choose which mutual fund, your money will be invested in, and then decide on a sum of money which you wish to invest, every month or one in two months or at whichever frequency you choose. If you allow, the amount will automatically be deducted from your bank account and invested into the mutual fund.
Once the investment has been made, the allocated units of the mutual fund will be visible in your account.Once you receive returns on the mutual fund, it is up to you to decide if you wish to reinvest it or withdraw it.
Types of SIPs
Top-up SIP: Choose this option, if you are willing to and have the money to increase your investment amount over time. It also allows you to invest in better and higher performing assets which also have higher and better returns.
Flexible SIP: If you do not wish to invest a specific sum every time, you should pick this option, as it allows the investment sum to remain flexible, allowing you to keep your money free whenever you need it.
Perpetual SIP: In case you do not want to put an end date to your SIP investments, you can pick this option. Since most SIPs have a duration of 1 to 5 years, you can withdraw the entire sum at the end of this duration. However, by picking this option, there is no end date, and you keep investing in different mutual funds.
Are you finally ready to start investing and wish to learn more about SIPs from experienced financial planners? Get in touch with us at Daily Finserv, to receive assistance with your investment plans.
