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What is SIP Systematic investment Plan ?

Here we are talking about SIP (Systematic investment Plan).

“Little drops of water make the mighty ocean.”

SIP is investment strategy which gives you certain amount of money at regular interval. The investors get better return by investing their money in various ways of investment plan. Today SIP is one of the best plans to invest where they make regular, equal pay into mutual fund, trading account etc. SIP plan has various benefits like long term advantage, flexibility, regular-equal pay, moderate risk, disciplined savings etc. You can invest money in weekly, quarterly, yearly or monthly basis instead of lump sum in an every year. This plan is smart and attractive for investor because every investor chooses regular return instead of market or any other risk. It creates future wealth and important to start investing in SIP plan to get benefit early in life. There is an option available and you can choose any one from Balanced Fund, Growth Funds, Equity Diversified Funds, Tax Saving Funds, Index Funds etc as per your requirement and convenience.

The investors don’t require being an expert in marketing strategy or timings to invest in stock markets. It is an investment strategy by implementing the regular and periodic purchasing of investment. You can build a portfolio by investing a fixed amount of money, say 1,000 rupees at regular intervals monthly quarterly or annually as convenient. SIP is an investment that can be made by people of all ages. The duration, fund options and amount may vary from one age group to other but investors of all age groups can enter and gain from SIP.

How to proceed with SIP:- You can ask your Bank / Broker to allow a mutual fund of your choice to debit a certain amount towards investment every month. You have to specify the amount & date of the month when money will be invested and duration of SIP. For example, if you choose to invest Rs 3000, 05th of every month, for 3 years, the mutual fund will keep debiting Rs. 3000 from your account towards investment in the fund for 36 months. You can also follow this on your own by investing Rs. 3000 every month. However you need to be much disciplined with your budget to achieve this.

This is the real benefit of investing through SIPs. We never know when the markets will crash. Hence, it is best to spread our investments over a period, instead of taking the risk of catching a peak through a lump sum investment.

Benefits of SIP plan:

Savings: – This plan gives you regular return on investment as per terms (monthly, quarterly etc…) which helps to save money in disciplined manner. You can easily change funds option and make desired changes in this Plan.

How Save 28 Lacs in 25 yrs with help of Direct Mutual Fund

Flexibility: – In SIP – Systematic investment Plan plan no lock in period for investment even though it is advised to stay for long term benefit. The investor can easily exit from plan at any time. SIP also allow to increase or decrease amount of invested. When the prices high investor can buy more units.

Long term gain: – When you start investing in small amount you may not see profit initially but in long run you can find growth which you have invested in this Plan. Rupee cost average and power to compounding are the reason for high return on investment.

Tax benefit: – If you invest in SIP – Systematic investment Plan in Equity Taxing Saving Mutual Fund (ELSS) you will be able to get tax benefit under Section 80C for a maximum investment of Rs 1 Lac.

Moderate Risk: – This plan is risk minimizing where small investors do not find resources for investment so with less risk the investor gets average return on investment.

Convenience: – This plan is more convenient and hassle free. You can easily invest by your banking partner using ECS process which automatically debited money from your bank on monthly basis. SIP prove to be quite hassle free as they come with easy payment options. You may either give post dated cheques for your fund or may give standing instructions to your bank to debit your account for a particular SIP amount on a particular date.

Rupee Cost Averaging – This is an important benefit of investing in SIP ( Systematic investment Plan ) as it saves you from the market fluctuations. The cost averages out over a period of time. You are able to purchase more units when the Net Asset Value (NAV) drops and you buy fewer units when the NAV rises. Etc……

Power of compounding

ParticularMr. XMr. YMr. Z
No of Years102030
No. of Months Invested120240360
Monthly Amount1500075005000
Assumed Return12% p.a12% p.a12% p.a
Monthly Return0.95%0.95%0.95%
Total Invested Amount180000018000001800000
Estimated Redemption Amount3360538689893015404866

SIP Plans make investment easy and more flexible. SIP Plan is the most promising investment instead of keeping money in your savings bank account. By investing in SIP plan you can take benefit of regular savings along with interest.

Wonderful video to help you to understand long term investment benefit

However the perks of SIP plan do not stop right there you can customize this plan as per your requirements.

At last this plan gives you an opportunity to make better return on investment.

“The more you invest, the more you earn.”

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Also Read:

What are the Benefits of Systematic Investment Plan (SIP)?