Everyone
dreams to increase their wealth. In order to increase wealth, we recommend, if
you are beginners then invest in Systematic Investment Plan (SIP).
You must know what are the benefits, disadvantages, how to start SIP investment and how it works.
People
save money and invest it in the securities market to earn higher profits. But
remember, due to the fluctuating nature of stock markets.
The
stock market goes up and down and is always not favourable. There is always
risk of investment.
So, now the question arises that:
- How can we reduce this risk of losses?
- Can we make average profit even if we do not have knowledge of the predicting market?
- We do not have a large amount of funds to invest in lump sum so is there any option to invest on a monthly basis?
The
Answer of these Questions is SIP (Systematic Investment Plan).
So,
you should gain complete knowledge about Systematic Investment Plan (SIP)
and How to start SIP Investment and how it works. We will explain to you
step by step.
What is the systematic investment plan (SIP)?
Mutual Funds have offered a facility to the investors known as systematic investment
plan (SIP).
This
facility offers you to invest a fixed amount at a fixed interval
(weekly, monthly, quarterly, half yearly or annual basis).
Only
you have to choose a mutual fund scheme in which you want to invest and root
your investment through SIP.
How to Start
SIP Investment and how does systematic investment plan work?
There
are various Mutual Funds schemes prevailing in the market. By taking help of a
financial advisor you can choose a best mutual fund scheme according to your
best fit.
Once
you choose the scheme then you can root your investment through
SIP. So under this you need not to invest a lump sum amount at a time.
You
have to invest a fixed amount at a fixed interval say weekly, monthly,
quarterly, half yearly or annual bases.
In
this scheme a fixed amount is deducted from your savings account and invested
in chosen mutual fund investment.
In
this scheme you need not to invest a large amount. You can start investing
as low as Rs. 500. So, this scheme is also fit to your budget.
What are the benefits of a systematic investment plan (SIP)?
Small amount
You
can invest a small amount in a systematic investment plan which can be as low
as Rs. 500. So this is beneficial for those who want to invest but they do not
have enough funds.
Compounding effect
If
you are investing only Rs.500 per month for a long period it would result in a
large return.
Habit
If
you are investing in a SIP (systematic investment plan), you have a habit of
saving a little amount at regular intervals.
Higher and Steady Returns
As
compared to FDs, it provides you higher returns. Investment of fixed amounts at
fixed intervals for a long period reduces your cost, which results in steady
returns.
One-click withdrawal SIP
During
emergency situations, one-click withdrawal SIP is helpful.
Early age
If
you start investing at an early age for a longer period than this plan gives
you a high return in future.
What are the disadvantages of systematic investment plans (SIP)?
Long term commitment
If
you are investing in SIP (systematic investment plan) then you need to have
patience. you have to invest for a long period, if you are demanding better
returns.
Lower returns in rising markets
If
you are investing a lump sum amount at the time when the market is at bottom
then you will get higher returns.
But
in systematic investment plans you have to invest fixed amounts at
fixed intervals which give you less return when the market rises, because you
are not investing large amounts when the market is at bottom.
Fixed amount
Under
SIP you have to invest a fixed amount, so if the market is at bottom then you
cannot buy more shares by investing large amounts at that time. You need to
follow investment of fixed amount.
No
doubt, you can set a higher investment than earlier if your monthly income
increases and you want to invest more, than in this case you have to follow the
new fixed pattern in future.
Whether to choose SIP or one time investment?
In
one time investment you have to invest the amount on one-time payment.
This
is beneficial for those who have large funds to invest or have received any
windfall gains (like. bonus, profit on sale of property etc.)
You
can invest at the time when the market is at bottom and sales when the market
goes up. This will give you the large returns in the shortest period.
But
on the other hand if you have not enough funds and you want to invest then
you can go for SIP.
Under SIP you will get an average return regularly. There is less chance of losses. This will give you benefits for a longer period.
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