A Systematic Investment Plan or SIP allows you to invest a specific amount monthly ( or weekly, quarterly). SIP is a planned approach helps you build the habit of saving and growing wealth.
With SIP, your money is auto-debited from your bank account and invested into a specific mutual fund scheme. You are allocated certain number of units based on the ongoing market rate (called NAV or net asset value) for the day.
Every time you invest money, additional units of the scheme are purchased at the market rate and added to your account. Hence, units are bought at different rates and investors benefit from Rupee-Cost Averaging and the Power of Compounding.
With volatile markets, most investors remain skeptical about the best time to invest and try to ‘time’ their entry into the market. Rupee-cost averaging allows you to stop guessing. Your money fetches more units when the price is low and lesser when the price is high. During volatile period, it may allow you to achieve a lower average cost per unit.
- Benefits of Systematic Investment Plans:
- Disciplined Saving
- Flexibility – You can discontinue the plan at any time.
- Long-Term Gains – Due to rupee-cost averaging and the power of compounding SIPs have the potential to deliver attractive returns over a long investment horizon.
- Convenience – SIP is a hassle-free mode of investment.
When you invest, ensure you only do in Direct Plan variants of the Mutual Funds. You then get upto 40% more in long term portfolio size by avoiding commissions and brokers.
