SIP stands for Systematic Investment Plan, a mode of investing in mutual funds that allows one to invest fixed amount in a specific mutual fund scheme at rgular intervals (weekly, monthly, quarterly). It makes regular investment convenient:
- Easy auto debit facility,
- Affordable with a low minimum investment requirement: SIP doesn’t incur any additional charges.
While investing is a personal decision based on everyone’s unique situation, every financial plan will have some allocation of the 3 major asset classes:
- Equity or stocks,
- Debt or fixed income instruments,
- Precious metals like gold and silver.
But investing in the stock markets can be a challenge, with the wild and unpredictable swings in share prices. To reduce the risk of investing “at the wrong time”, many investors can opt for a Systematic Investment Plan (SIP) in the Best Mutual Fund of their choice.
An SIP, or a Systematic Investment Plan, is a mode of investment whereby you, the investor, invests a pre-determined amount on a monthly basis, on a pre-determined date, into the Best Mutual Fund Scheme of your choice. Today, it is among the most chosen method of investing by retail investors.
4 Benefits of SIP:
While there could be other benefits, here are 5 that we would like to share.
- Benefit of Rupee Cost Averaging:
Since you are buying units every month, you will be buying at market dips and rises, so you are averaging your cost of investments over the time period.
- Benefit of Power of Compounding:
If you start early, SIP helps you to start investing to meet the greater expenses of your life. Saving a small sum of money regularly makes your money work with power of compounding and increase impact on wealth accumulation.
- Helps you avoid market timing:
SIP investors can avoid market timing – as they get the chance to buy low, and later when they want, sell high.
- It’s possible to start small:
The best part of starting an SIP is that it is suitable for any wallet. You can start with a ticket size of your choice, you can start small with as low as Rs. 500/- in the Best Mutual Fund of your choice and slowly build up your wealth.
- Helps you avoid market timing:
With an SIP you do not need to try to time the market and thereby inculcates automatic financial discipline into your investing method.
Making investments in stock markets via Systematic Investment Plan (SIP) has been proved as a strategy to many investors and also helps you to play safe given the volatile nature of stock markets.
From a practical point of view, an SIP is the preferred route of mutual fund investments as investing through SIPs inculcates the discipline of saving & investing. It is best to align the frequency of investments with that of your income schedule. If you are a salaried employee, you could go for monthly SIP to regularize your savings. Most of our bills follow a monthly cycle so it makes sense to view SIP as a monthly ‘expense’ that is actually an investment helping you to inculcate the investing habit.
The yardstick for SIP must be your financial goal – the fund that you select to start an SIP in should best match your Financial Goal.
An SIP is the first step to your financial goals and should not be judged on the basis of market performance. Market uncertainty will prevail but your financial goals are fixed. Let your SIP achieve it. You need patience and confidence till the time your SIP helps to achieve your financial goal. Remember mutual funds sahi hai & SIP is one of the sahi tareeka for investing in mutual funds.
Disclaimer: The views expressed here in this Article / Video are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. Quantum AMC / Quantum Mutual Fund is not guaranteeing / offering / communicating any indicative yield on investments made in the scheme(s). The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader. The Article / Video has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and views given are fair and reasonable as on date. Readers of the Article / Video should rely on information/data arising out of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments. None of the Quantum Advisors, Quantum AMC, Quantum Trustee or Quantum Mutual Fund, their Affiliates or Representative shall be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary losses or damages including lost profits arising in any way on account of any action taken basis the data / information / views provided in the Article / video.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.