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Systematic Investment Plan (SIP)
Investing in Mutual Funds (MF) can be confusing and overwhelming. SIP, or Systematic Investment Plan, makes it easier to invest in MF and can offer a range of benefits. Learn more about SIP and why you should consider it for your investment portfolio.
What is SIP?
SIP is a disciplined approach to investing in MFs. Instead of making a lumpsum investment, you invest a fixed amount of money at regular intervals, such as monthly or quarterly. This helps you avoid the pitfalls of trying to time the market and overcomes the hurdle of investing a large sum of money in one go.
Benefits of investing in Mutual Funds via SIP
Compounding Effect
Investing a small amount consistently over a long period can yield significant returns due to the power of compounding.
Rupee Cost Averaging
By investing a fixed amount regularly, you buy more units when the market is down and fewer units when it goes up, lowering your average cost of investment.
Convenient
It is a hassle-free way of investing, as you can set up SIPs online and easily track your investments, making it a convenient option for busy professionals.
Diversification
MF allows you to invest across a wide range of asset classes, sectors, and companies, which helps you diversify your portfolio and reduce risk.
How does SIP work in Mutual Funds?
When you invest in SIP MFs, your money is allocated to a fund that is managed by a professional fund manager who invests it across various securities such as stocks, bonds, and other assets. The returns you earn are based on the performance of the underlying securities.
Step 1: Choose a Fund
Select a fund based on your investment needs, such as risk appetite, investment horizon, and financial goals.
Step 2: Set the SIP Amount
Decide how much money you want to invest in SIP regularly, say ₹ 5,000 per month.
Step 3: Determine the Investment Interval
Choose the frequency of investment, such as monthly or quarterly, and the date on which the investment will be made.
Types of SIP investments
There are different types of SIPs to suit the investment objectives of different individuals:
1. Top-Up SIPs
You can increase the SIP amount periodically, such as annually, to keep pace with inflation.
2. Flexi SIPs
You can choose to increase, decrease, or pause the SIP amount depending on market conditions or your financial situation.
3. Perpetual SIPs
These SIPs do not have a fixed investment period and can continue indefinitely as long as you want to keep investing.
Types of International Funds
Risk-Return Profile
Choose a fund that matches your risk appetite and investment goals. High-risk funds offer potentially higher returns but come with greater risk, whereas low-risk funds offer moderate returns and stability.
Fund Manager
Research the fund manager's experience, track record, investment strategy, and style to ensure that it aligns with your investment objectives.
Fees and Charges
Compare the fund's expense ratio, exit load, and other charges to ensure that they do not erode your returns.
How to get started with SIP investment?
Investing in SIP MFs is easy and hassle-free. Here are the steps to get started:
- Step 1: Choose a Fund: Research and select a fund that suits your investment needs and goals.
- Step 2: Open a Demat Account: Open a demat account with a broker, such as Zerodha or Upstox, to invest in stocks and MFs online.
- Step 3: Submit KYC Documents: Complete KYC formalities by submitting your identity and address proof to the broker to comply with regulatory requirements.
- Step 4: Choose SIP mode: Choose the SIP mode, such as direct or regular, and provide your bank details to set up the SIP online.
Conclusion
SIP investment is a popular and convenient way to invest in MFs and suitable for those seeking long-term capital appreciation. By creating a disciplined investing habit, you can achieve your financial goals and build wealth over time. Start investing in SIP MFs today and secure your financial future.
l/J-2, Chandi Vyapar Bhawan, Exhibition Road, Patna, 800001
Mon-Sun : 8:00 AM - 8:00 PM
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