Basics of Systemic Investment Plan

Systemic Investment Plan commonly known as SIP is the option to invest in mutual funds. This article is all about What is SIP and advantages of SIP.

What is SIP?

Well, SIP means you agree to invest certain amount of money in mutual funds at particular time interval say for example, Monthly, Quarterly, half-yearly…etc… Daily SIP are also available in some fund houses.

Say for Example, if you agree to start a monthly SIP of Rs.1000 in some equity mutual fund than it means that, every month Rs.1000 will be debited from your savings account automatically (Because you have opted for ECS or you have given post-dated cheques) and go towards buying units of mutual funds. SIPs don’t have to do anything with timing the market. Means when the market will be Up, you will be able to buy less units & when the market will be down, you will be able to buy more MF Units.

Advantages -

- Well, the main advantage of SIP is ‘Rupee-Cost-Averaging’. Means in the long run, SIP will bring down your over all entry level into the market and thus more profit.

- SIP is convenient.

- SIP is Automatic so it will automatically impart a good Financial Habit in you. Every month before you spend, some amount of money will be automatically go towards SIP and thus Investments for the long term.

- If you make profit in the stock markets, You have to buy when the market is low and sell when the market is high. But practically it is very difficult to implement. But SIP will do this for you automatically. Means when the market will be up, you will be able to buy less Units and thus less risk and when the market will be down, you will be able to buy more units and thus increasing the probability of your profit.

Thus SIP is the Best way to invest your money in the stock market.