Raghunandan Money – Investment Khushiyon Ka.

What is SIP in stocks and Is it worth it?

Published : May 16, 2024

Stock market is known for wealth creation, but for a beginner it might be a daunting affair. The prices fluctuate now and then as the market moves. Choosing the right company becomes a task as there’s a plethora of options. And the only fear the traders have is making the wrong decisions. To deal with all such issues, traders can try SIP! Yes, a systematic investment plan offers a structured and feasible way to navigate the stock market. Most commonly traders start SIP in mutual funds, but do know you can start SIP in stocks as well. 

What is Stock SIP?

Stock SIP allows us to invest a fixed amount of income in a special stock at a fixed interval; it can be monthly or quarterly. Imagine it as a recurring payment for your stock portfolio, that offers a consistent dose of investment. And helps you to build wealth over some time regardless of market volatility.Sips are long-term in nature and one needs to have sheer patience and commitment. Through this method of investing the investor enjoys compounding benefits. This lowers the risk as the investment is spread over a long period. 

Building Up Your Stock SIP: The Complete Guide.

How to do a Stock SIP?

  1. Choose an investment partner: 

This step involves selection of a broker, with whom you can open a demat account. This demat account keeps all your stocks and investment safe. You have all the records of stocks in this account. Before opening a demat account, always check whether the broker you are choosing allows the Sip function. Thereby automating your investment. 

  1. Pick your preferred stock:

This is the most crucial step, therefore the traders must select the company that will benefit them in the long run. Here’s the checklist – examine the financial health of the company and industrial trends. Evaluate their track record and future growth potential. Don’t miss out on checking the dividend payouts and whether they match your investment goals.

  1. Configuration your SIP:

Once you have made up your mind about a particular stock,  you are required to decide the amount you are ready to invest and the time interval as well. The only thing to keep in mind is SIPs require consistency over a long period. Initially, you can begin with an amount you are comfortable with that won’t affect your budget. Then gradually increase the amount for better returns.

  1. Automate your process: 

The last step in this process is to automate the process, this step ensures that you don’t skip your SIP payment. Almost every broker allows you to automate your SIP so that you don’t have to place them manually. You can just set your SIP and forget about it. Automation will automatically do your payment. 

Why invest in stocks through SIP? 

Now that you have understood how to start your Sip in stocks. Let’s cover some compelling reasons why to invest in them:

  1. Long-term Benefit:

    The power of compounding helps in wealth creation over a long period. By consistently investing in shares through Sip, you can capitalize on growth potential. Regular investments provide compounding returns to your wealth in the long term. 
  2. Healthy investing habit:

    Once you start investing regularly without any delay, you initially develop financial discipline. This habit of investing keeps you on track to conquer your financial goals without any temptations. 
  3. Rupee-cost averaging:

    This is the most prominent advantage of investing in stocks. In simple language, it means when the prices are less you can buy more stocks. And while the prices are high you can buy less. This helps to even out the cost per share over a period thereby reducing the impact of market fluctuation. 
  4.  Start little, grow large:

    Stock SIPs allow you to invest a small sum of money, thereby making the stock market available for all those investors with limited funds. You can start with small funds and grow massive income with consistency and patience. 

Bottom line:

To sum up we can say stock sip is a resourceful approach for all the newcomers and experienced investors. Through this method of investing, one can gradually accumulate wealth in the stock market. Stock Sip helps to build wealth brick by brick without affecting the existing income. It emphasizes long-term investing habits, and develops financial discipline and cost-averaging. Also helps to attain all financial goals and objectives. Undeniably the stock market is risky and one needs to have proper research and knowledge before diving in. Therefore, selecting the stocks that provide better returns must have a proper investment strategy.  

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