What Is SIP?
By admin_mutual | Jan 10, 2023
A Systematic Investment Plan (SIP) is the name given to an investment option provided by Mutual Funds that enables investors to invest a fixed amount in a Mutual Fund scheme on a regular basis, such as once per month or once every three months, as opposed to doing so all at once. The installment payment is just like a recurring deposit and could be as little as INR 500 per month. It is convenient because you can instruct your bank to automatically deduct the specified amount each month.
SIP has become more popular among Indian MF investors because it encourages disciplined investing without concern for market volatility or market timing. The best way of starting investing for the long term is unquestionably through one of the systematic investment plans provided by various mutual fund types. It is crucial to make investments for the long term, which means you should get started as soon as possible – to maximize your final returns.
Advantages of SIP
SIPs, or Systematic Investment Plans, are an easy, hassle-free, and practical way to start investing in different types of mutual funds in India. The benefits of regular SIP investing and long-term investing are boosted by the compounding benefits. The compounding effect makes sure that you get returns on both your principal (the amount you actually invested) and the gains on your principal, so that your invested sum increases over time as your investments generate returns. Also, the returns generate more returns.
Due to the power of compounding and average costing, an investor who chooses the SIP route to investing can do so in a time-bound fashion, with no market concern. By requiring the investor to make slow, regular deposits into a scheme of their choice, SIP encourages discipline in investing. In order to build a corpus, one can select the frequency of investment from daily, weekly, monthly, fortnightly, or yearly. The investor’s bank account is automatically debited after selecting a date and frequency for the transaction.
SIP is a way to invest in mutual funds, whereas mutual funds refer to an investment instrument or product. As the name implies, a mutual fund SIP allows you to invest consistently over time and build a corpus to support a variety of financial objectives. In simple terms, SIP is a component of mutual funds and is not distinct from them. It should be noted that the two cannot be compared because SIP investment is a method of investing in mutual funds, while mutual funds are an investment product.