Systematic Investment Plan for the average investor

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A systematic investment plan (SIP) is an investment option that is offered by mutual funds. It helps the average investor who doesn’t have huge funds to save regularly. The minimum amount that one can invest in SIP is as low at Rs. 100. One can also choose the frequency of investment as either monthly or quarterly. Systematic Investment Planning is similar to a recurring deposit account with a post office or any bank, where one puts in a nominal amount every month regularly.

The only difference between the two investment options is that in SIP, the amount is invested in mutual funds. A systematic investment plan allows the investor to take complete advantage of the growth potential that mutual fund investments offer, even if he/she doesn’t have a large sum of money. It helps one make money over the long term. Also investing in an SIP is very easy. All you need is an account with a stockbroker.

SIP urges the investor to keep a fixed amount aside every month and makes him/her disciplined in the matters of his/her savings. This amount invested is either directly debited from one’s bank account or the investor is required to give the mutual fund company post-dated cheques.

Many mutual fund companies do not charge any entry load for investing in Mutual Fund SIP. And if one decides to sell his/her units after a year of the purchase, there is no exit load charged either.

To get optimum benefits from your system investment planning, you need to leave your money untouched for a duration of at least 3 years. In this mode of investment, market experts and professionals who have commendable knowledge about the market manage your investments. So you get financial planning & portfolio management services of professional managers, which are otherwise unaffordable for any individual investor. Also owing to their experience and knowledge, your investments perform much better. Mutual funds in India are governed by the Securities Exchange Board of India (SEBI). The SIP is designed in such a way that your investments can make benefits from the volatility of equity markets. Mutual fund investors make their investments according to their objective. So by investing in a Systematic Investment Plan, you can also get the benefits of asset allocation without any extra efforts.

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