Systematic Investment Plan
SIP is a smart and hassle free mode for investing money in mutual funds. SIP allows you to invest a certain pre-determined amount at a regular interval (weekly, monthly, quarterly, etc.). A SIP is a planned approach towards investments and helps you inculcate the habit of saving and building wealth for the future.
How does it work?
A SIP is a flexible and easy investment plan. Your money is auto-debited from your bank account and invested into a specific mutual fund scheme.You are allocated certain number of units based on the ongoing market rate (called NAV or net asset value) for the day. Every time you invest money, additional units of the scheme are purchased at the market rate and added to your account. Hence, units are bought at different rates and investors benefit from Rupee-Cost Averaging and the Power of Compounding.
Rupee-Cost Averaging
With volatile markets, most investors remain sceptical about the best time to invest and try to 'time' their entry into the market. Rupee-cost averaging allows you to opt out of the guessing game.
Since you are a regular investor, your money fetches more units when the price is low and lesser when the price is high. During volatile period, it may allow you to achieve a lower average cost per unit.
Power of Compounding
Albert Einstein once said, "Compound interest is the eighth wonder of the world. He who understands it, earns it... he who doesn't... pays it."
Put in simplest terms the phrase compound interest means that you begin to earn interest income on your interest income, resulting in your money growing at an ever accelerating rate.
The rule for compounding is simple - the sooner you start investing, the more time your money has to grow.
Benefits of Systematic Investment Plans
Disciplined Saving - Discipline is the key to successful investments. When you invest through SIP, you commit yourself to save regularly. Every investment is a step towards attaining your financial objectives.
Flexibility - While it is advisable to continue SIP investments with a long-term perspective, there is no compulsion. Investors can discontinue the plan at any time. One can also increase/ decrease the amount being invested.
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.
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.
SIPs is an ideal mode of investment for retail investors who do not have the resources to pursue active investments.
We look forward to an opportunity to serve you with your Mutual Fund Investments. Please click on the link below to submit your details for registering with BSE StarMF via WealthviaMF.