Systematic Investment Plan (SIP. In this article you can find Meaning of Systematic Investment Plan, Benefits of SIP, How does SIP make difference over the rest, Benefit of compounding etc. Now you can scroll down below and check complete details regarding Systematic Investment Plan.
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Systematic Investment Plan (SIP)
Meaning of SIP :
Systematic Investment Plan is an option where you invest a fixed amount in a mutual fund scheme at regular intervals. SIP is a best financial planning tool that helps you to create wealth, by investing small sums of money every month, over a period of time. Investing at an early stage of life makes you to get the benefits of two strategies, i.e., 1.rupee cost averaging and
2.compounding.
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For instance, you can invest 1,000 in a mutual fund every month. It is a disciplined investment plan and helps reduce propensity to market fluctuations. It is a convenient tool that helps you protect yourself from capital depreciation and also render significant wealth creation in the long-run.
How does SIP make difference over the rest :
As Systematic Investment Plan is a method of investing a fixed sum, regularly, in a mutual fund scheme it habituates investment discipline.
SIP allows one to buy units on a given date each month, so that one can implement a saving plan on their own.
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Advantages of Systematic Investment Plan :
- Opportunity to invest small amounts every month on a regular, timely manner.
- No need to spend your valuable time to analyze the market daily.
- Rupee cost averaging.
- Power of compounding.
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Rupee cost averaging :
Many investors expect to speculate on the right moment to invest. But forecasting whether the market is going to move up, down or sideways in future is difficult even for professionals. With rupee-cost averaging we can escape from the guessing game of trying to buy at low and sell at high.
In SIP by investing on a regular basis, we can enjoy the advantage of market dips without worrying about when they’ll happen. our money in the SIP buys more shares when the price is low and fewer when the price is high, which means a lower average cost per share over long run.
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2. Benefit of compounding :
The basic Logic behind this concept is that earnings from investments that are not spent but reinvested , over a period of time, can generate greater returns.This is the single most important reason for investors to start investing early and keep on investing on a regular basis to achieve the long-term financial goals.
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