Systematic Investment Plan (SIP) is similar to a Recurring Deposit. It is a method through which you can invest in mutual fund scheme of your choice through small and periodic instalments (Monthly or Quarterly).
SIP is a smart and hassle-free way of investing in mutual funds to achieve your financial goals.
You can invest as low as Rs. 1000 per month and the amount gets directly debited form your bank account every month on the specified date.
A SIP inculcates a savings habit in the investor as it requires the investor to regularly set apart some amount of money (that is pre decided) every month and thus enforces a saving discipline on the investor.
By investing an amount of your choice every month via an SIP, you can meet future financial goals, like funds for your child's education/marriage, your retirement corpus, down payment for a house or even funds for a vacation.
Everyone would like to buy low and sell high, but investing through an SIP will ensure investments regardless of a big fall or rise in the market as timing the market is not only very difficult but risky too.
SIPs invest fixed sums at regular intervals resulting in more units when prices are low and less units when prices are high. Over time these market fluctuations are generally averaged. Therefore, average cost of the investment is often reduced.
Compounding means earning interest on interest. Over time, the more interest (or returns) you reinvest, the more money you have working for you, and the more you can earn. Mutual funds offer an ideal way to capture compound returns.
Once the amount to be invested and mutual fund is decided, your money will directly get debited from your bank account every month on a chosen date and you are allotted units depending on that day's NAV.
Once you decide the amount you wish to invest every month, your money will get debited from your bank account every month on a chosen date.
The money gets invested in a mutual fund you have selected and you are allotted units depending on that day's NAV (Net Asset Value).