Any investment you make should be in line with your investment profile. This includes your income, expenditure and future financial goals. Depending on your ability to invest you can choose how and where to invest. Different types of investment schemes are available in the market, providing various attractive solutions to your money related issues. One such scheme is Systematic Investment Plan or SIP, which has become a popular choice over time. But before you start investing, the most important thing to keep in mind is to do a thorough background check of the scheme in which you are investing and the company where you are investing. Here is some information which will help you to get a thorough idea.
What is SIP?
A lot of investors are still confused as well as scared when it comes to investing in any type of SIP schemes because of the lack of clarity in their mind. The Systematic investment plan allows you to invest in any scheme of your preference in a systematic manner. It can be weekly, monthly or quarterly as per your preference. There are many SIP plans in India such as Reliance Small Cap Fund, Birla SL Equity fund and many more.
The money you invest in SIPs gets invested in mutual funds. In other words, SIP is a tool in itself using which you can invest in mutual funds. It is a smart and hassle-free way to invest in.
If you want to set specific investment goals and want to handle your finances in a strategic manner, then you should invest your money through Systematic investment plan.
SIP comes along with a whole lot of benefits which are highly beneficial for the investor. Below goes the list of some of the benefits which it provides.
Helps you to become a regular investor
Human beings have the tendency to spend more with the increase in their earnings. It has become a common complaint among many that they are very much indisciplined when it comes to managing their savings. Investing in SIP can make you disciplined in that way. Most of the SIP schemes come in with a fixed investment date, for which you need to keep a sum of money aside. This whole system will inculcate discipline in you and over time will turn out to be a good habit.
Set the plan as per your convenience
Investing in any mutual fund through a SIP scheme gives you full liberty to chose the tenure of the investment and also the amount you want to invest. At the same time, you can also hold back the money transfer if you see any problems and start over again.
Allows you to invest small amounts
SIP allows you to start investing from the very start of your career. SIP investments start from Rs500 which anyone can easily afford. Thus a person from not so high financial background can also get high returns by investing small amounts in longer tenure. This further breaks the myth that mutual fund investments can only be done by investing in larger amounts of money.
You don’t need to worry about the market
When you are investing through a SIP plan you don’t need to worry about the rise or fall of the market. When the market is low SIP will buy you more units of a mutual fund and when the market is high it will buy you less unit of a mutual fund. This is also known as rupee cost averaging.
Enjoy the power of compounding
SIP allows you to invest for longer periods of time. Over time as your investment starts to generate returns, it gets added to the principal amount bringing in more returns. The process continues during the tenure, bringing in a huge amount. This is termed as the power of compounding.
How to invest in SIP?
As mentioned earlier, SIP is a route via which a person can invest in a mutual fund scheme. The other route is a one time payment known as lump sum. Now before you select a scheme to start a SIP with, its important to calculate the regular SIP amount. For this you can use any online SIP calculator that is available for free. The first step would be fix the total corpus required for your long term or short term goals, say your retirement or higher education of your children etc and then, fixing the time horizon within which you want to achieve this goal. In the next step, enter these details in the SIP calculator. Multiple iterations will show how much amount you need to invest monthly and for how long to reach the desired corpus, also factoring in the inflation rate. Once you are done with the calculations, you can simply start an SIP via any of the ways mentioned below :-
- Start SIP by directly investing the scheme from AMC website. Say you want to invest in HDFC Mid Cap Opportunities Fund, You can do so by going to the website of HDFC AMC, create your account, furnish the necessary details and finish the KYC, select the scheme, select the SIP amount and the date from which the SIP needs to start and finish the payments. Your money will start getting auto debited from your account from the date you have set.
- The second way to start SIP online is to go via RTAs like Cams and Karvy who have multiple AMCs and their funds registered with them. All one needs to do is be KYC compliant , select the scheme and start investing
- The third and the easiest way is to go to new age online investment platforms that offer swift onboarding and paperless KYC , as well as host funds from all AMCs
SIP s come in with a whole lot of benefits. While investing in SIP you should keep in mind that it has certain risk factors associated with it. A thorough background check is very important before investing in any schemes. You can always check the amount of money you are going to get as a return with the help of the SIP calculator online before investing. SIP generates returns over a period of time so you need to be very patient. If you keep moving out with your fund whenever there is a dip in the market it will only increase your expenses. You can invest in SIP Online by visiting the company website and uploading all the needed documents or offline by filling up forms given to you by the company agent and signing the required documents.
Systematically investing makes you disciplined but it also brings in a lot of responsibilities with it. You need to keep a fixed amount ready for your SIP investments.
SIPs make you a better and regular investor. It makes you disciplined and more focused on your investment strategies. It further keeps your nature of overspending in control. Compared to other monetary schemes SIP mutual fund is one of the safest and most convenient ways to invest in. Time acts as the key factor in SIP. A large amount of return can be gained by investing a small amount of money, only when invested for a longer period. Investors while investing through SIP must invest for a time period of five to ten years, then only they can avoid the problem of near term volatilities or small returns in comparison to the amount invested. If you have a higher financial goal like investing in real estate or you want a lumpsum amount of money for your child’s education then you must definitely start to invest in SIP.