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Do you know, what is Systematic Investment Plan(SIP)?

Published : September 26, 2017

Do you know, what is Systematic Investment Plan(SIP)?

Many of us have surplus money but we all are confused where to invest it to get the good return, now a day’s FD’s and RD’s are not as attractive as it used to be. Stock market gives a high return but it’s not everyone’s cup of tea because of the high risk involved in the market.

So, Systematic Investment Plan (SIP) is the best option to invest and grow the wealth. Learn about SIP with Rmoney and grow your wealth to fulfil your dreams.

What is Systematic Investment Plan?

Systematic Investment Plan is popularly known as SIP. It is a hassle-free and smart way of investing your money in Stock & debt market by the mode of the mutual fund with the minimum amount.

SIP will help in disciplined savings, very convenient, flexible and the best tool for long-term gain. It develops a regular and disciplined habit of saving, and that will help you in build your wealth for your life.

Through SIP an investor gives his money to the well-established fund houses, the fund houses collectively invest the fund in different financial instruments like some portion of the fund in the equity market, some portion is being invested in the debt market, money market regularly.

How does it work?

SIP gives you a flexible and easy way of investment. Your money is auto-debited from your given bank account at a fixed interval. Every time when you invest your money you purchase the additional units of the schemes at the prevailing market rate. Every time when you purchase the units the market rate would be different, in this way you will be benefiting with the Rupee-cost averaging and power of compounding.

Rupee-cost averaging and Power of compounding are the key features of SIP, and these two features will build a good corpus in the long-term as compared to other investment tools like FD and RD.

Do you know, what is Systematic Investment Plan(SIP)

 

What is Rupee-Cost averaging?

The market is not same every day, it fluctuates every minute at one moment goes up and the second moment goes down, the market reacts on different economic events, sometimes positive sometimes negative so the price of stocks goes up and down.

In sip, you invest regularly or say you purchase the units regularly irrespective of the market movement. So, when prices are up you purchase fewer units and when the market is down and prices are low you get the opportunity to buy more units in the same amount. And this thing happens regularly till the maturity of your plan let’s say 10 to 15 years.

But, suppose you would have invested directly in the stock market, would it be possible for you to stay invested at the time of downfall of the market when you see the losses you may immediately withdraw your money from the market. But in SIP you stay invested and kept investing regularly irrespective of the market movement.

The attitude of stay invested and regular investment gives a boost to your wealth. And this is also the key of successful investors.

What is Power of Compounding?

Power of Compounding or say Compound Interest is entitled as the “Eighth wonder of the world”. When you invest for a long period and earn returns on the returns earned by your investment, in this way your money start compounding.

This effect of the power of compounding helps you to build a large corpus that will help you to achieve your long-term financial goals with regular investment through SIP.

What is the required minimum amount?

You can start investing in SIP with just Rs. 500. This is the lowest amount you can start with.

 


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