Everyone has heard about SIP, we truly believe that it is a phenomenon that should be a part of everyone’s journey. The power of SIP is actually a very important tool to achieve many milestones of your life. Let us understand SIP in detail
SIP has been gaining immense popularity among all kind of investors and the investments flowing in SIP today is unprecedented. The numbers are extraordinary and it continious to grow month on month and year on year
There are about 7.44 Crore SIP account in India as on November, 2023 & 17073 crores is the value of investment just from the month of November, this is the data from AMFI – Association of Mutual Funds in In IndiaWhat is SIP Investment
What is SIP Investment
As the name suggests, Systematic Investment Plan is a systematic way of investing in Mutual Funds. The investor invests a fixed amount of money every month which is automatically debited from his account on the date selected by him every month. The date can be any day of the month. This is systematic form of investing which gives excellent returns in the long run.
The great thing about SIP is that you dont have to monitor it regularly like when you are directly investing in stocks. There is a fund manager who is charge of the fund and he ensures that the fund is doing well at all times. There are many reputed fund managers who have shown their caliber over a period of time by generating excellent returns for their schemes
Investing in SIP should always be done for the long term this evens out the market volatility and gives you an edge, let us explain this point further. Suppose the market is in downward trend, this is actually good for a mutual fund investor as he would be buying the units at a lesser cost than previously and if the market keeps falling he averages better. The great thing is that when the market reverses and goes into a uptrend you gain to benefit as you had bought
Before you start investing in SIP – Understand the factors that are important to keep in mind
- The objective of the investment
- The amount of money you want to generate from your investment
- The amount of money you need to invest every month to reach your investment objective
- The duration of your investment to reach your goal
- Your risk appetite level
To invest in SIPs, you need to first get clarity on – your financial goals, risk appetite, and investment horizon.
Once you are clear on the above you can start investing in SIP but ensure that you have completed your KYC and your bank details are linked to your investing platform.
Remember that when you are investing in Mutual Funds you in investing in Stocks through Mutual Funds and in this case you will be allotted NAV which stands for Net Asset Vlaue, whereas you get shares when you buy stocks directly. These NAV’s function more or less the same way in terms of ownership. The beauty of this is that you can choose to sell the complete NAV which is called units or sell it partly and the amount is credited in your account in 2 days time!
Note: Remember that always look as to how the market is functioning when you decided to sell as its important that you do not sell when the market is in heavy down trend.
Why should you Invest in SIPs
Here are 8 Key benefits:
- Flexibility – This is a huge advantage which not many asset class can boast
- Convenience – Its hugely convenient to keep track of your Mutual Funds as well as take action on them
- Transparency – Its highly transparent and all details of the scheme is provided to you at all time. This helps you in evaluating the performance of your fund and take necessary action
- Rupee cost averaging – We have explained this before in this article but as you understood we gain to benefit from the fall in the market
- Professional Management – All funds are run by highly qualified fund managers who have a team of research analyst with him and they ensure that the fund delivers good results.
- Systematic Investment – There is a system in place which takes away the manual intervention of making the deposit every month as the agreed amount is automatically debited from your account on the said date every month
- Compounding power – This is our favourite part. To truly understand the power of compounding read this blog
- Tax Benefits – Through the ELSS Mutual Funds you get tax benefits under 80C
- Insurance cover – There are some Mutual Funds which gives you Insurance cover – Give us a call to know more