Systematic Investment Plan (SIP)

Systematic Investment Plan is an investment plan in which the Investor invests a fixed amount regularly in a Mutual Fund scheme, Monthly or Quarterly. The Investor can buy units of any selected scheme on any date. A pre-determined fixed amount of sum can be invested in that scheme every month or quarter either through post-dated cheques or through ECS (Auto Debit) Facility.

Investors who intend to invest in Systematic Investment Plan need to just fill a simple form indicating the name of their chosen scheme, the amount, frequency and the date on which the amount can be deducted from their account/ or the date on which post-dates cheque will be banked by the Asset Management Company (AMC).

In recent years, especially after Demonetisation, the popularity of SIPs has shown huge growth the good thing about investing in SIPs is that one can invest an amount as small as Rs. 500 per month.

 Here are some other advantages of SIPs:

  1. Flexibility: Staring and closure of SIP are very easy and there is no penalty on foreclosure. The SIP can be discontinued at any time during the investment cycle.
  2. Long term gains: When invested for a longer duration, the SIP generates lucrative returns due to the power of compounding and rupee cost averaging.
  3. Disciplined savings: Once you commit to a SIP plan, you become disciplined in your savings. Each installment of SIP takes you closer to your financial goals.
  4. Convenience: Systematic Investment Plan can be started through any Financial or banking service provider. The facility of starting SIP online is also available.
  5. No timing the market: The common dilemma of investors is how much and when to invest but in case of SIP there is no need to time the investment as once a fixed sum is decided upon, the investment amount is deducted from your bank account and deposited in the SIP on the due date. The only thing investors need to be careful about is to have sufficient funds in the bank.

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