Systematic Investment Plan

What is Systematic Investment Plan?

A systematic investment plan (SIP) is an investment vehicle offered by many mutual funds to investors, allowing them to invest small amounts periodically instead of lump sums
Systematic investment plans (SIPs) are considered the most convenient and efficient way to invest in the equity markets
A SIP allows an investor to invest regularly. One puts in a small amount every month that is invested in a mutual fund. A SIP allows one to take part in the stock market without trying to second-guess its movements
SIP allows you to invest a predetermined amount at a regular interval (weekly, monthly, quarterly, etc.).
A SIP is a planned approach towards investments and helps you inculcate the habit of saving and building wealth for the future.
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

How does it work?

A SIP is a flexible and easy investment plan. A person’s money is auto-debited from your bank account and invested into a specific mutual fund scheme.one person is allocated a certain number of units based on the ongoing market rate (called NAV or net asset value) for the day.
Every time a person invests money, additional units of the scheme are purchased at the market rate and added to his/her account.
Hence, units are bought at different rates and investors benefit from Rupee-Cost Averaging and the Power of Compounding.

Benefits of SIP

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.