SYSTEMATIC INVESTMENT PLAN (SIP)

systematic investment plan

A systematic investment plan is an investment scheme or plan which helps the investor to invest their funds in mutual funds scheme on a regular basis, i.e. on a weekly or fortnightly or monthly or quarterly or yearly basis whenever the investor wants. People can invest a small amount starting from ₹500 and earn huge returns in the future.

Few people think that SIP and Mutual funds are the same but in reality, SIP is just a tool to invest money in Mutual Funds Schemes. SIP is gaining popularity year by year. Most importantly investors can avail SIP at any point in time even with small earning. SIP helps an investor to stagger his investments in equity mutual fund schemes over a period. 

WORKING OF SIP

Systematic investment plan is a method of investing a fixed amount on a regular basis in a mutual fund scheme. SIP allows the investor to buy units on a given date each month so that he can implement a saving plan for himself. The biggest advantage of SIP is that the investor need not time the market. Rather than timing investing every month will ensure that investor has invested at the high and the low, and make the best out of an opportunity that could be tough to predict in advance.

An investor can invest a pre-determined fixed sum in a scheme weekly or monthly or quarterly or lump sum depending on his convenience or income earned, through post-dated cheques or  ECS (auto-debit) facility. Investors only need to fill up an application form and SIP mandate form on which they need to fill up their choice for the SIP date on which the amount will be invested. Subsequent SIPs will be automatically debited through a standing instruction given or post-dated cheques. The forms and cheques are then submitted to the office of the Mutual Fund / Investor Service Centre or nearest service center of the Registrar & Transfer Agent. The sum invested is at the closing Net Asset Value (NAV) of the date of realization of cheque.

BENEFITS OF SIP

DISCIPLINE

Investment in a SIP is systematic. Investing through a systematic investment plan infuses discipline. In SIP a fixed sum is deducted every week or month from investor’s account and invested in the selected fund. So, once the investor has set up the SIP by selecting the amount and number of installments, he/she doesn’t have to do anything apart from ensuring that his bank account has the money available in it on the installment date.

EASY TO INVEST

SIP can be started for a sum as less as Rs. 500. Investment in SIP is a hassle-free process as the amount shall be deducted monthly from the investor’s bank account automatically once his one-time mandate is approved.

POWER OF COMPOUNDING

The power of compounding is the most important benefit of SIP. By investing through SIP at an earlier age and for a long period of time investor gets the benefit of compounding which will increase his return to so many times.

RUPEE COST AVERAGING

Investment in SIP is done across market cycles. When the market is low the investor gets more units whereas when the market is high he gets fewer units and hence his investment is averaged out. This helps the investor by not worrying about market volatility and he keeps on investing while accumulating wealth.

ACHIEVING GOALS

SIP is a great tool through which investors can achieve their financial goals. SIP helps the investors to earn high returns in the future. Any small investors not having proper funds can also do SIP and it will help an investor in earning high returns in the future.

There are various other benefits of SIP for the investors and it is the perfect method to invest money and accumulate wealth over a longer period of time. There is no time to invest market through SIP. You can do it at any point in time.

At this time economy is facing a huge loss, the stock market or stock exchange is quite low at this point in time but you can make an investment through SIP at any time because no one can predict the future and SIP is done for a longer duration.

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