SIP Systematic Investment Plan
SIP or Systematic Investment Plan is a planned investment program under which you invest a small amount of money at regular intervals (monthly / quarterly) in Mutual Fund schemes. SIP is a simple device that helps you to save and invest in a disciplined manner without having to time the market.
Who should invest via SIP?
People with long-term goals like buying a house, building funds for retirement or children's education etc. It makes a lot of sense to build a corpus over a period of time when you cannot invest a huge amount at one go. Although SIP is recommended for long-term there is no lock-in period and you enjoy complete liquidity of your funds.
Advantages of Systematic Investment Plan
SIPs give a disciplined approach to investing: One of the major benefits of investing via SIP is that it helps in instilling the much-needed investment discipline.
SIPs are also very convenient. Money is deducted from your Bank Account through Auto Debit Facility. Liquidity -Facility to withdraw the Invested Amount any time. Although not recommended for all times.
Minimize the risk of equity fluctuations:
As you are making a periodic investment in equities you are able to ride through ups and downs of equity with ease. When the market goes up you earn fewer units and when it falls you receive more units.
The advantage of Diversification:
A major benefit of investing in Mutual Funds via SIPs is that you get the advantage of diversification even with small investments. So your risk is spread out enabling you to make most of the gains from different holdings.
The benefit of Compounding:
Since you remain invested for a longer period, the investment is compounded and hence the yield goes up. Earlier you start investing in SIP, the better it is even with a small saving of Rs 1000/- and as your investment compounds over the longer term, it gives you an advantage of wealth creation. SIP should be done for a period of 10 to 15 Years (preferably 15 Years or more) to get the full benefit of compounding.
The benefit of Rupee Cost Averaging:
It is a technique of buying fixed rupee amount of a particular investment at regular intervals, regardless of NAV. You are buying the units in all and different scenarios -Market goes up, Market goes down, Since you are buying units every month at a different NAVs, the purchase cost is averaged out.