SIP stands for Systematic Investment Plan under which investors invest a specific amount of money over a period of time, at regular intervals. It is a very poweful mode of investment in mutual funds for creation of wealth in long run. By investing in SIP, investor has the advantage of Rupee cost averaging. It also helps the investor save compulsorily a fixed amount regularly.
The stock markets are very unpredictable and most of the time they are highly volatile. It depends on a number of factors - domestic as well as international. In this scenario, a systematic investment plan is best strategy to minimize the risk and gain maximum returns. Since the amount of investment is same, the investor gets more number of units in declining market and less number of units in rising market. Thus if one invests consistently the same amount at regular intervals, the average cost per unit is always lesser than the average market price.
In order to start investing in SIP, you need to plan your savings and set aside some amount of money every month that you can comfortably invest on a regular basis. Go for a diversified equity fund or a balanced fund with a proven track record. While investing in SIP, set your time horizon to long term. At any time you can enter or exit the scheme, start or stop the monthly investment.
The stock markets are very unpredictable and most of the time they are highly volatile. It depends on a number of factors - domestic as well as international. In this scenario, a systematic investment plan is best strategy to minimize the risk and gain maximum returns. Since the amount of investment is same, the investor gets more number of units in declining market and less number of units in rising market. Thus if one invests consistently the same amount at regular intervals, the average cost per unit is always lesser than the average market price.
In order to start investing in SIP, you need to plan your savings and set aside some amount of money every month that you can comfortably invest on a regular basis. Go for a diversified equity fund or a balanced fund with a proven track record. While investing in SIP, set your time horizon to long term. At any time you can enter or exit the scheme, start or stop the monthly investment.
Benefits of Systematic Investment Plan
- SIP help in accumulation of wealth by giving you the power of compounding.
- Rupee cost averaging helps minimize the risk in volatile market.
- SIP is convinient tool for investment. One can give post dated cheques or opt for ECS instructions.
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