SIP – Things you should know about before start investing


The SIP or Systematic Investment Plans became very popular in the last few years. Courtesy to demonetisation, many individuals found the charm of SIP and mutual funds investment.

Many “Mutual Fund Sahi Hai” campaigns also aided in popularising the idea of SIP and mutual funds investment. Meanwhile, a number of investors, including all those who invest in SIP.

Many investors have the perception of SIP as a product. It is very common to run across a query – What is SIP meaning? Can I put money in a Systematic Investment Plan to achieve my financial goal? Generally, Systematic Investment Plans and mutual fund schemes consider as synonyms without knowing SIP’s meaning. A SIP is a mere tool that helps you to invest regularly in mutual fund schemes, mostly in equity mutual fund schemes.

Systematic Investment Plans aid you to wobble your investments in equity mutual fund schemes over a period of time. Many mutual fund advisors do not suggest investing a lumpsum in equity mutual funds. They believe that wobbling investments over a period of time, depending on the quantity of money, is a considered better way to invest in equity mutual funds and avoid catching the market at a certain risk level. Also, it is an appropriate tool for salaried investors for regular investments in mutual funds.

Lets have a quick look on Systematic Investment Plans and how you can apply them to invest in equity mutual fund schemes to create good wealth over a long period of time to attain your long-term financial goals.

What is SIP?

A SIP or Systematic Investment Plan permits an investor to invest a firm amount systematically in a mutual fund scheme, typically an equity mutual fund scheme.

Systematic Investment Plans

Why should you invest in SIP?

One, it imparts financial discipline to your life. Two, it helps you to invest regularly without grappling with market mood, index level, and et cetera. For example, if you are supposed to put a firm amount every month in a mutual fund scheme, you need to find time to do it. At certain times, you might be thinking about market conditions and reconsider postponing your investments. Or you might be thinking of investing more if the market condition is positive. Systematic Investment Plans puts an end to all these issues. Automatically your money is invested regularly in a scheme without any endeavour by you.

What are the different benefits of Systematic Investment Plans?

SIPs help you to center your purchase cost and increase in returns. When you invest regularly for a time period irrespective of the market situations, you would get more portion when the market is low and less portion when the market is high. This centered out the purchase cost of your mutual fund investments.

Compounding is another benefit of Systematic Investment Plans. When you invest for a long period and earn gains on the returns earned from your investment, your money would commence compounding. This helps you to assemble a large collection that help you to achieve long-term financial goals with consecutive small investments.

How much money do I require to start a SIP?

You can start SIP in a mutual fund scheme with a minimum of Rs 500.

Can I customize my SIP?

Yes, you can. Though the most liked SIP is investing a firm amount every month, investors can customize the way they put money in SIPs. Many fund firms allow investors to invest over monthly, bi-monthly and fortnightly, according to their comfort.

Aside to this, Step-up Systematic Investment Plans let investors to enlarge the SIP amount frequently. ‘Alert SIP’ is another form of the frequent systematic investment plan which posts an alert to the investor to acquire more when the markets are low.

Regarding ‘perpetual Systematic Investment Plans,’ investors don’t have to select the expiration of the SIP. Once the financial goal is met, the investors can conclude the SIP by sending a written communication to the fund firm.

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