The word SIP has created much buzz in the lives of common man. Small investors have started investing in mutual fund through SIP. If you are still not aware about what it is, this article will help you knowing everything in details about it. take a look:
What is SIP?
Systematic Investment Plan or SIP is a method of investing money in mutual funds. In SIP, you invest a fixed amount of money in a mutual fund of your choice every month. The set up is such that the money is automatically debited from your bank account. To know what amount of monthly SIP you need to invest to achieve a certain money goal, you can use SIP calculator.
There are numerous advantages to investing your money in mutual funds using SIP. Take a look at it.
Features of SIP
Discipline
With SIP you become desciplined investor. In an SIP a fixed amount is deducted every month from your account and invested in your selected fund. So, once you have set up the SIP by selecting the amount and number of installments, you don’t have to do anything apart from ensuring that your bank account has the money available in it on the installment date.
No need to wait for right time to invest
In general, an investor is always in a dilemma that if it is a right time to invest or not. Nobody can predict market movements. Investing through SIP resolve this dilemma as it is a periodic investment which occurs across market cycles. SIP is not free from the market volatility and the fund value may go down, but it frees you from the worry of market movements.
Pause it anytime
You can stop your SIP anytime you want. You just have to simply out of the SIP plan. There is no fine for it. This has a very big advantage over recurring deposits (RD) which usually put a fine on you if you want to stop it. After stopping your regular SIP investment, you can choose to get back the amount or let it continue to be invested in the mutual fund.
No worries in cash crunch
If for some reason you are unable to make the balance balance in your account for the SIP investment of a certain month, you can still continue with the SIP next month without any problems. No fine or charges will be levied against you. No other investment policy give you this feature.
Top-up your investment
If your earning has increased or you are able to save more, you can simply top-up your SIP amount or you have the option to start new SIP. This enhances the
flexibility of the investor.
Power of compounding
When you invest using an SIP plan, your monthly SIP investment gives returns. Those returns are added to your actual investment amount and invested again! So over time, your continuous monthly SIP and the returns earned by them is subjected to a compounding effect that ensures exponential growth.