SIP (Systematic Investment Plan) is one of the investments in mutual funds where a fixed amount of mutual fund scheme can be use for long-term financial perspective. In this scheme, an individual can invest money in weekly, quarterly or monthly basis. SIP investment is the smarter way of investment in the mutual funds.
How does SIP Systematic Investment Plan work?
It is the easiest mode of investment as compared to other investment plans. The money gets debit from the bank account of an individual who applies for SIP (Systematic Investment Plan) Scheme. A certain number of units allotte per day which is base on Net Asset Value (NAV). The units added every time the individual invests to the account. The units base on the market rates (NAV). The investors do not need to be expert in the stock markets and investment plans. The units can be purchase at various rates and forms. It is vice versa process. When the prices of the markets are high the investors are in a stage to buy more units and when the prices of the markets are low the investors are in a stage to buy fewer units.
Investors can also check Daily NAV value of Mutual fund on respective websites.
There are mainly two methods of investing:
The investment methods are Rupee-Cost Averaging and Power Compounding.
The Stock markets are not predictable. So, it is difficult to know the best time for investment. Rupee cost averaging is the method where investors can understand the best time to invest in the Stock Markets. The major advantage of Rupee Cost Averaging is that fewer units earning are done when the price is high and more units are earned when the price is low. During a variable time, the Lower average cost generate per unit.
The Power of compounding method is the investment plan where the value of the fund with a higher tenure is earned through the interest. When the investor invests in an amount, earning is done through it. The interests get compounded and gathered over a time period. The fund value would be higher if the tenure is longer. Therefore with the strength of compounding, more wealth generates. So the individuals who want to invest should invest early so as to create more wealth.
Benefits of Systematic Investment Plans:
To get the benefits of Systematic Investment Plan (SIP), there should be planning for the successful investment. Investing in SIP requires investing in intervals (weekly, monthly and quarterly). SIP helps individuals to save in a particular direction and manner.
There is flexibility under Systematic Investment Plan. There is no lock-in period and individuals can exit anytime in between. The amount of investing can be increase or decrease under SIP.
SIP is a slow process Long Term gains Plan. When the individual invests a smaller amount, there is no visible profit initially but later on, there is high growth in the money which is investing.
The risk involved in the SIP investment is moderate and is the most convenient and problem-free investment plan.
Initial investment step:
While planning to invest approximate and rough calculations can be hazardous to the investor. The financial goal can not be achieve if the investment is not planned and disciplined. The best way to invest in SIP is to make a reliable plan and work with the numbers in terms of short and long-term investments and financial goals. The investment complete with Rs 500 per month so that the individual can fix the tenure to achieve the goal.
Top 5 SIP investments.
Here are the Top Five investment Fund names.
- Birla SL Frontline Equity Fund,
- SBI Bluechip Fund-Regular,
- BNP Paribas Mid Cap Fund,
- Mirae Asset India Opportunities Fund-Regular,
- Franklin India Prima Plus Fund.
Also, check out top 10 Tax saving investments,