Systematic Investment Plan
What is Systematic Investment Plan?
Systematic Investment Plan or SIP is a systematic way to invest your fixed amount of money in a specified Mutual Fund. It allows you to invest your money at a regular interval (weekly, monthly or quarterly basis). This investment method works similar to the investment in Recurring Deposit, where we deposit a fixed amount of money in a bank.
Benefits of Systematic Investment Plan:
SIP enforces a disciplined approach towards investing. It infuses regular saving habits which we all probably learned during our childhood days when we used to maintain a piggy bank. Investment through SIP is a good choice for those investors who do not possess enough understanding of financial markets. It has brought mutual funds within the reach of an average person. It has enabled even those investor who has a low budget of Rs 500 or Rs 1,000 to invest on a regular basis in place of making a one-time investment.
How Systematic Investment Plan works?
The investors play an important role in Systematic Investment Plan. Here are few steps about how it works:
Open an account: First, you have to open a SIP account. For this you must have your KYC details viz. identity proof, address proof and a photograph.
Investment Plan: Once your account is all set up. Next, you have to decide how much amount you want to invest and for how long period? SIP is an easy investment plan. In SIP your money is auto invested in your selected Mutual Fund Scheme through your bank account.
Investment Technique: It helps investors to invest in those mutual funds who gives a good rate of return. They receive a number of mutual fund shares based on the specified amount they invested. The number of shares totally depend on market price.
If the price falls the investor purchase more shares and when the price rises they purchase less share. By doing this the average price of the share is always closer to the lower end and you always get a profit.
Key Benefits of Systematic Investment Plan:
- Savings for future
- Flexible Investment Options
- Long-Term Gains