The popularity of SIPs or Systematic Investment Plans has gone up in the last few years. Thanks to demonetisation, many individuals discovered the charm of SIP and mutual funds. Amfi’s Mutual Fund Sahi Hai campaign also helped popularize the concept of SIP and mutual funds. However, many investors, including those who have already made SIP investments in mutual funds, are often confused about SIPs.
Many investors think that a SIP is a product. It is not uncommon to find a query. Can I invest in a SIP to achieve my goal? A SIP and mutual fund schemes are not synonymous. A SIP is a mere tool that helps you to invest regularly in mutual fund schemes, mainly in mutual capital fund schemes. A SIP helps you stagger your investments in mutual fund capital schemes over a period. Most mutual fund advisors do not recommend investing a large amount in mutual equity funds.
What is a SIP?
A SIP or systematic investment plan allows an investor to invest a fixed amount regularly in a mutual fund scheme, usually a capital mutual fund scheme.
Why should SIP?
One, impart financial discipline to your life. Two, it helps you invest regularly without struggling with the mood of the market, the level of the index, etc. For example, if you are supposed to put a fixed amount each month in a mutual fund scheme, you need to find time to do it.
What are the other benefits of SIP?
SIPs help you average the purchase cost and maximize returns. When you invest regularly for a period regardless of market conditions, you would get more units when the market is low and fewer units when the market is high. This averages the cost of purchasing your mutual fund units.
Another benefit, called the eighth wonder of the world by some, is the power of composition. When you invest for a long period and you want returns.