Systematic Investment Plan is a plan which contemplates the investing of a fixed amount of money at regular intervals, may it be on a weekly or on a monthly basis into stocks or mutual funds.
SIP stands for Systematic Investment Plan, it is an investment product through which investor can invest in mutual funds. When investing through SIP, you don’t have to invest a lumpsum because this plan enables regular investment with as little as a few bucks every now and then thereby allowing you to invest while meeting all the other expenses.
In view of the fluctuations involved in stock market, there is need to properly plan for investment, and thus the SIP as an effective and strategic investment tool. SIP has specific advantage in that shareholders are actually in a position to benefit both in a bullish and bearish market without having to guess the market correctly.
This usually means that a certain quantity is invested at fixed time intervals, making it possible to develop a systematic and least anxiety-provoking view of the market. SIP enables investors to invest in the market-linked instruments such as mutual funds, insurance companies’ unit linked insurance plans and other financial institutions.
Let’s briefly summarise the main advantages of SIP Investment
- Convenience: Easy and convenient, zero accounts and brokerage for all Investment Plans; your SIPs grow in baskets.
- Financial Discipline: SIPs introduce money discipline by making you commit to saving money at planned intervals it denies lavish spending.
- Flexibility: From the viewpoint of the investor, be able to invest any amount of capital for investment at any time of the investor’s desire and get never seen before flexibility.
- Lower Risk: SIPs reduce capital risk and improve preparedness in terms of time horizon to turn volatile markets into an investor’s favor thus it spreads investments over time.
How SIP works
An SIP is proving to be a very successful product when you buy it, you select the mutual fund you want your money to be invested in and then you decide on how much money you wish to invest monthly or every two months or at whatever your frequency is. If you allow, it will be debited on your account to invest in the mutual fund of your choice.
After the investment has been made then the number of units bought in the mutual fund of your choice will reflect on the account. Being an open-ended scheme, once the mutual fund is matured and the amount is received back, it purely remains the discretion of the investor to whether or not he wants to invest the money back in the mutual fund or take the money back.
Types of SIPs
Top-up SIP: Take this option if you are willing to and have the capital to add to your initial investment with time. It also enables you invest on better and higher grade ones which as well has higher and better value or yield.
Flexible SIP: If you do not want to fix your stake a certain amount every time you must choose this option since it opens the flexibility of the investment sum thus you are able to keep your money free in case you need it.
Perpetual SIP: If I and my clients do not wish to set an end date to my SIP investments, then this is the option to select. Most SIPs come with lock-in options of 1 to 5 years, you can therefore redeem the whole amount at any time that ends this period. However, having selected this option, there is no deadline and you continue to invest in various mutual funds.
Are you finally ready to start investing and wish to learn more about SIPs from experienced financial planners? Get in touch with us at Policyinserv, to receive assistance with your investment plans.
