Systematic Investment Plan : Everything You Need to Know!

Systematic Investment Plan

Everything You Need to Know

SIP investment is an strategy where an individual invests a fixed amount of money at regular intervals in a mutual fund scheme.

It helps in accumulating wealth over a long period of time and is a disciplined approach towards investing.

SIPs are suitable for investors who want to invest in the stock market but are not willing to take the risk of investing a lump sum amount.

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How SIP works?

An investor chooses a mutual fund scheme and decides on the amount to be invested at regular intervals, usually monthly.

The amount is deducted automatically from the investor's bank account and invested in the chosen scheme.

The investor gets a certain number of units based on the NAV (Net Asset Value) of the scheme on the date of investment.

The number of units purchased varies based on the NAV, which may fluctuate based on the market conditions.

Effect of Compounding

Compounding involves incorporating the interest earned into your base capital, and then calculating interest based on this newly increased capital. As a result, compound interest causes your money to grow exponentially. Compounding increases with investment tenure. This can be seen in the table below:

Benefits of SIP

Disciplined approach towards investing

Averages out the cost of investing, resulting in better returns in the long run

Helps in avoiding the pitfalls of timing the market

Allows investors to start with a small amount and gradually increase their investment over time

Provides flexibility to investors to pause, stop or increase the SIP amount as per their financial goals and requirements.

SIP is a disciplined approach towards investing that can help individuals accumulate wealth over a long period of time.

It provides flexibility and convenience to investors, who can start with a small amount and gradually increase their investment.

Investors need to carefully choose the mutual fund scheme and regularly monitor their investment to achieve their financial goals.

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