When it comes to investment, we all want good returns and a much relaxed/easier process. However, selecting an investment portfolio with these qualities is not easy. But when you opt for a SIP plan you are sorted.
Here are some of the questions which arise in an investor’s mind when starting a SIP.
- When and where to start with?
- How to invest?
- How much to invest?
- What will be the risk involved?
But, don’t worry we are here with the answer to all your questions which will make it easier and understandable for you.
Systematic Investment Plan (SIP)
A systematic investment plan (SIP) is an investment portfolio that allows you to make regular, equal payments into a mutual fund scheme. The regular payment of a fixed amount allows investors to save regularly with a smaller amount of money. SIP investment can be made quarterly, monthly, or even weekly. The process is quite convenient as the particular amount you choose to invest is auto-debited from your account and is invested in the mutual fund scheme. The SIP plans are flexible which means you are free to increase or decrease the amount of investment anytime you want.
Why SIP?
Convenience
SIP Investments are made in a phased manner. As you get the convenience of starting your investment with a low amount of Rs 500 that too with an auto-debit system.
Power of Compounding
You get compound interest on your investments made which makes it better for long-term benefits.
How it Works?
SIP is a passive investment that allows you to put money in it and continue to invest regardless of how it performs. The one more advantage you get here is- the money you invest is handled by money market experts and hence, it’s not your headache. Your money is invested in different companies depending on your SIP plan.
SIP works on Dollar-cost averaging which involves buying the same fixed-dollar amount of a share regardless of its price at the time of investment made. Hence, the amount invested is generally fixed and doesn’t depend on unit or share prices. This helps you to buy less no. of shares when unit prices rise and more shares when prices drop.
When you opt for a long term SIP you can surely grow your money in a better way. You can also take the advice of a financial advisor to help you get the best situation plan. Once you start investing in SIP and later you discover that it’s not working the way you wanted you can stop your further investments anytime and can also withdraw the invested amount.
How to get started?
- The first step begins by analysing the amount to invest and the time-frequency i.e monthly, weekly, quarterly.
- The second part is – analysing your requirements i.e when you will need the invested amount and what will be that amount, on that basis you can fix your investment tenure.
- Now look for the best performing SIP based on the interest rate offered and the track record of the fund managers.
- Opt for the one which suits your requirement best.
Note- SIP is a very smart and hassle-free way to invest in mutual fund plans. But many of us are still unaware of SIP and its benefits. Some even also consider SIP is a separate investment tool but actually it is a way to invest in mutual funds.
Pros and cons of SIP Investment
Pros
- Once you start, it’s not your headache
- The Auto debit system makes your investment a disciplined one.
- Can be started even with a small amount
- Low risk involved
Cons
- To gain better returns you need a long-term commitment
- Early withdrawal can charge you penalties
- You can miss buying opportunities.
Quick tips-
SIP is one of the best mutual fund investment options which gives you better returns when invested for long. All you need is to be patient and wait as the money you invest will grow for sure. Last but not the least, never skip the payment.
