Complete Details for Systematic Investment Plan (SIP)

Meaning :
Systematic Investment Plan (SIP) is an option where you invest a fixed
amount in a mutual fund scheme at regular intervals.SIP is a best financial
planning tool that helps you to create wealth, by investing small sums of
money every month, over a period of time. Investing at an early stage of life
makes you to get the benefits of two strategies, i.e., 1.rupee cost averaging
and
2.compounding.
For instance, you can invest 1,000 in a mutual fund every month. It is a
disciplined investment plan and helps reduce propensity to market fluctuations.
It is a convenient tool that helps you protect yourself from capital depreciation
and also render significant wealth creation in the long-run.
How does SIP make difference over the rest :
As SIP is a method of investing a fixed sum, regularly, in a mutual fund
scheme it habituates investment discipline.
SIP allows one to buy units on a given date each month, so that one can
implement a saving plan on their own.
Advantages :
1.Opportunity to invest small amounts every month on a regular , timely
manner.
2.No need to spend your valuable time to analyze the market daily.
3.Rupee cost averaging.
4.Power of compounding.
Rupee cost averaging :
Many investors expect to speculate on the right moment to invest. But
forecasting whether the market is going to move up, down or sideways in
future is difficult even for professionals. With rupee-cost averaging we can
escape from the guessing game of trying to buy at low and sell at high.
In SIP by investing on a regular basis, we can enjoy the advantage of market
dips without worrying about when they’ll happen. our money in the SIP buys
more shares when the price is low and fewer when the price is high, which
means a lower average cost per share over long run.
2.Benefit of compounding :
The basic Logic behind this concept is that earnings from investments that
are not spent but reinvested , over a period of time, can generate greater
returns.This is the single most important reason for investors to start
investing early and keep on investing on a regular basis to achieve the long-
term financial goals.