Overview of "SIP"

"SIP" here means (Systematic Investment Plans), a fixed amount of money is debited by the investors in bank accounts periodically and invested in a specified mutual fund. The investor is allocated a number of units according to the current Net asset value. Every time a sum is invested, more units are added to the investors account. 

 The strategy claims to free the investors from speculating in volatile markets by Dollar cost averaging. As the investor is getting more units when the price is low and less units when the price is high, in the long run, the average cost per unit is supposed to be lower.

 SIP claims to encourage disciplined investment. SIP's are flexible, the investors may stop investing a plan anytime or may choose to increase or decrease the investment amount. SIP is usually recommended to retail investors who do not have the resources to pursue active investment. 

 SIP investment is a good choice for those investors who do not possess enough understanding of financial markets. The benefits of SIP is it reduces the average cost of units purchased, as well as consistent investment, ensures that no opportunity is missed arising out of the market. 

 In India, a recurring payment can be set for SIP using Electronic Clearing Services (ECS). Some mutual funds allow tax benefits under Equity-linked savings schemes. This, however, has a lock-in period of three years and is provided by many company including Kotak, Reliance, Aditya Birla etc.

 An SIP is a Systematic Investment Plan which allows you to invest in the stock market via mutual fund units on a monthly or quarterly basis. It is the best way of investing for individuals who don't have a large sum of capital but have regular monthly cash flows. It is especially designed for the salaried population.

 Power of Compounding 

Albert Einstein once said, "Compound interest is the eighth wonder of the world. He who understands it, earns it... he who doesn't... pays it." The rule for compounding is simple - the sooner you start investing, the more time your money has to grow. 

Example If you started investing Rs. 10000 a month on your 40th birthday, in 20 years time you would have put aside Rs. 24 lakhs. If that investment grew by an average of 7% a year, it would be worth Rs. 52.4 lakhs when you reach 60. 

However, if you started investing 10 years earlier, your Rs. 10000 each month would add up to Rs. 36 lakh over 30 years. Assuming the same average annual growth of 7%, you would have Rs. 1.22 Cr on your 60th birthday - more than double the amount you would have received if you had started ten years later!

Benefits of Systematic Investment Plans

  Disciplined Saving - Discipline is the key to successful investments. When you invest through SIP, you commit yourself to save regularly. Every investment is a step towards attaining your financial objectives.

 Flexibility - While it is advisable to continue SIP investments with a long-term perspective, there is no compulsion. Investors can discontinue the plan at any time. One can also increase/ decrease the amount being invested.

 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. You can issue a standing instruction to your bank to facilitate auto-debits from your bank account.

SIPs have proved to be an ideal mode of investment for retail investors who do not have the resources to pursue active investments.

The most important thing is when do you SIP , don't stop SIP when market crash. Because it may loose your hard money and the benefit of  rupee cost averaging.

Note : Contact Us [through the Query form in right hand side] to learn more about Systematic Investment Plans and for purchase a investment plan ,so to start saving today!