SIPs through mutual funds are also ideal for individuals who want to save before they spend and are looking to become disciplined investors. These enable you to set a trigger to automatically redeem and/or switch from one scheme to another if the market becomes volatile.Ī SIP is a great tool in the hands of investors to build wealth with regular investments. Trigger SIP: Experienced investors can opt for SIP through Trigger. This is even easier if you do SIP online. While a fixed investment amount is still specified when starting a flexible SIP, you have the option of changing the investment amount up to 7 days before the instalment date. Your periodic instalments continue to be invested unless you give specific instructions to stop them.įlexible SIP: Flexible SIPs give you the convenience to increase or decrease the periodic investment amount as per your cash flow. Perpetual SIP: The end date of your SIP is not defined at the time of starting a perpetual SIP. 500 after every 6 months this means, after 6 months, your monthly SIP will become Rs.1,500 after another 6 months, it will rise to Rs.2,000 and so on). Under top-up SIP, you can increase the existing SIP amount periodically (for example, you could increase your existing SIP of Rs.1,000 per month by Rs. Top-Up SIP: As you progress in your career and start earning more, you can use the top-up SIP facility to increase your SIP investments. Let us take a look at the 4 main types of SIP facility : 5,000 per month made consistently over 10 years at an investment return of 12% can result in wealth accumulation of Rs. Power of compounding: As SIP investors remain invested for the long term, they get the benefit of compounding (returns over the returns already earned, exactly like compound interest). This concept is known as rupee cost averaging. Over a period of time of consistent SIP investing, your average cost of purchase reduces to below the current NAV of the scheme. Rupee Cost Averaging: As you invest fixed amounts periodically, you get more units of your chosen mutual fund when the market is low, and fewer units when it is high. As against this, in lump sum investing, your entry point becomes important since you could possibly face book losses if the market falls soon after you invest. Timing the market is not needed: Regularly investing through SIP helps you take advantage of market volatility and eliminates the need to time the market. You can invest small sums of as little as Rs.500 at fixed intervals. Low Entry Level: You don't need to accumulate a large sum to make SIP investments. Investing through SIP provides a number of advantages as compared to lump sum investment (where you invest a large amount in a single instalment). In SIP offered by SEBI registered mutual funds, your investments are managed by a team of professional fund managers for which you pay a nominal cost as disclosed in the Scheme Information Document of the respective Scheme.īenefits of Systematic Investment Plan over Lump Sum investment The number of units received depends on the scheme's current Net Asset Value (NAV). The investment amount can be auto-debited from your bank account on the basis of standing instructions, and the corresponding amount of mutual fund units are allocated to you. A SIP works on the basis of periodic and consistent investments, quite like a recurring bank deposit. Under SIP, you invest a fixed sum every quarter, month, or week as per your convenience.īefore you start investing, it's important to understand how SIP works. A SIP works on the basic rule of investing regularly, enabling you to build wealth over time. Systematic Investment Plan (SIP), is the ideal way of investing in mutual funds in a regular and systematic manner.
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