Systematic Investment Plan is a flexible and easy investment scheme. The money is automatically debited from the customer's account and is invested into a specific mutual fund scheme.
Most of the salaried individuals try to find out various ways of investment so as to save some money for the future. And, if they could earn handsome returns, then obviously that will be icing on the cake. People seek ways to invest their hard-earned money in order to build a big fortune out of it. One of the most reliable and trustworthy ways is Systematic Investment Plan (SIP). SIP is a hassle-free way to invest money in mutual funds. SIP allows customers to invest a certain amount at a regular interval. It is a systematic approach towards investments and helps subscribers to save and build wealth for the future.
How does SIP work?
Systematic Investment Plan is a flexible and easy investment scheme. The money is automatically debited from the customer’s account and is invested into a specific mutual fund scheme. Subscribers are allocated a certain number of units based on the ongoing market rate (called NAV or net asset value) for the day.
Every time a subscriber invests money, additional units of the scheme are purchased at the market rate and are added to the account. Hence, units are bought at different rates and investors benefit from Rupee-Cost Averaging and the Power of Compounding.
Here are the benefits of Systematic Investment Plan:
– Rupee-cost averaging: With tense markets, investors are mostly sceptical about which is the right time to invest in the market. Rupee-cost averaging allows a customer to opt out of this stage. Since s/he becomes a regular investor, their money fetches more units when the price is low and lesser when the price is high. During the volatile period, it may allow you to achieve a lower average cost per unit.
– Disciplined Saving: One thing that all people need to have to become successful investors is discipline. When an investor invests via SIP, s/he commit themselves to regularly saving. Every investment is a step towards attaining their financial objectives.
– Flexibility: Although it is advisable to continue SIP investment with a long-term perspective, a subscriber can discontinue it at any time. A customer can also increase or decrease the amount being invested.
– Long-Term Gains: Due to rupee-cost averaging and the power of compounding, SIPs have the potential to deliver attractive returns over a long investment horizon.
– Convenience: SIP is a hassle-free mode of investment. You can issue a standing instruction to your bank to facilitate auto-debits from your bank account.