Imagine you are a starter in the Indian market scene and planning to invest in a Mutual fund as you are sure that it will help you out in the future. However, you are having trouble arranging the fund for the investment in a lump sum. It is in such situations that Systematic Investment plans come to your aid. Now all you have to do is keep investing a fixed amount of money in the mutual fund over time, which is what SIP is all about. But that’s not it, there is more to SIP than investing small sums at regular intervals, and this blog will talk extensively about it.
Instead of making a lump-sum commitment, Mutual Funds offer a Systematic Investment Plan (SIP), allowing investors to invest a specified amount in a Mutual Fund scheme at regular intervals, such as once a month or once a quarter. The monthly installment amount, akin to a recurring deposit, could be as low as INR 500. It’s convenient because you may direct your bank to debit the amount every month.
SIPs are becoming increasingly popular among Indian mutual fund investors because they allow them to invest in a disciplined manner without worrying about market volatility or market timing. Mutual Funds’ Systematic Investment Plans are by far the most acceptable method to get started in the realm of long-term investing. It is critical to invest for the long term, which means you should begin investing as soon as possible to optimize your final results. To get the most out of your finances, your mantra should be “Start Early, Invest Regularly.”
Getting started with SIP:
The concept of systematic investment is straightforward. It is based on acquiring shares or units of securities of a fund or other investment on a regular and periodic basis. Dollar-cost averaging entails purchasing the same fixed dollar amount of a security at each periodic interval, regardless of its price. As a result, shares are purchased at different prices and in variable quantities—though certain plans may allow you to specify a specific number of shares to purchase. Because the amount invested is often set and unaffected by unit or share prices, an investor purchases fewer shares as unit prices rise and more shares as prices fall.
SIPs are considered passive investments since you continue to invest in them regardless of how well they perform. That’s why it’s crucial to keep track of how much money you’re accumulating in your SIP. You may want to reevaluate your financial objectives if you’ve reached a particular amount or are approaching retirement. Moving to an actively managed strategy or investment could help you increase your money even faster. However, speaking with a financial counselor or specialist to decide the best situation for you is always a brilliant idea.
Like other Mutual funds, the platform you use for making SIP also plays a critical role as it is an interface and a dashboard to the investment. INFINI MF is a well-crafted Mutual fund trading platform developed by Tradeplus online available on Web, Android, and iOS. Using the application will also provide you with other benefits from our end, such as extended customer support, a free Demat account, and plenty more to the list.
Advantages of SIP:
SIPs offer several advantages to investors. The first and most obvious advantage is that once you’ve decided on the amount and frequency of your investments, there’s not much else to do. Because many SIPs are automatically financed, you need to ensure that the funding account has adequate funds to match your contributions. It also allows you to withdraw a modest amount at a time, so you don’t have to deal with the consequences of withdrawing a large quantity all at once. Because stocks require very little emotion, they reduce the risk and uncertainty associated with other investments such as stocks and bonds. You’re also instilling some discipline into your finances because it demands a set amount at regular periods.
Disadvantages of SIP:
Formal systematic investment plans have several restrictions, even though they can assist an investor in maintaining a consistent savings program. For instance, they frequently necessitate a long-term commitment. This period can last anywhere between 15 and 25 years. While investors are free to leave the plan before the end date, they may face steep sales charges up to 50% of the initial investment if they leave before the end date. If you don’t make a payment on time, your plan will be terminated. Establishing systematic investing planning might often be costly. A charge for creation and sales can be as much as half of the first year’s investment. Investors should also be aware of mutual fund costs and custodial and service fees if they apply.
To know more about mutual funds and SIPs, you can refer to the premade module by our team of experts.