SIP is gaining popularity among mutual fund investors in India as it allows them to be disciplined with their investments and without worrying about market volatility. When one invests consistently, it can be easier for him to achieve his financial goals in the long run.
How does SIP work?
In SIP a fixed amount is invested over a fixed time frame. The amount invested helps you to buy a certain number of units of the fund. Over the long term, you get an opportunity to invest in the fund through its ups and downs, which can give investors the benefit of rupee cost averaging.
How to start SIP?
- The first and foremost step to start a SIP is to complete all the KYC requirements with your respective fund house or broker.
- One must look into the selection and registration of the SIP scheme of their choice with the fund house.
- For this, you have to visit the website of the fund house and research the schemes offered by them or contact any mutual fund distributor/advisor.
- The next step would be to select the right SIP as per your requirements.
- SIP amount
- tenure
- Frequency (weekly, monthly, quarterly, half-yearly, etc.)
Types of SIP
- Regular SIP: This is the most basic type of SIP under which you invest a fixed amount at regular intervals in the selected plan
- Top up SIP: Also known as step up SIP, this type of SIP allows you to increase the amount invested over time
- Permanent SIP: It is a type of SIP where the tenure is not specified, hence it becomes a permanent SIP.
- Multi SIP: This type of SIP helps you to diversify your investment portfolio by investing in multiple schemes of a fund house through a single instrument.
Benefits of SIP
- Disciplined Investing: Through SIP, you invest a fixed amount at regular intervals which inculcates discipline in your investment journey. It can be treated like any other regular outflow of the month.
- Small investment amount: Mutual funds through SIP allow us to invest a small amount regularly in their schemes. With a minimum amount per installment, it allows new investors to aim to achieve their financial goals.
- resilience: SIP allows investors to change their investment amount in case their savings increase or decrease in future. Making it a highly flexible investment method
- Compound effect: On choosing the growth option in your SIP. The returns generated will be added to the amount initially invested. This effect can lead to higher results in the future, which will help you achieve your financial goals in the long run. It should also be noted that the longer you stay invested, wealth creation potential is very high as can be seen from the illustration below
illustration
Amount invested per month: 500 rupees
Estimated Return on Investment: 12% p.a. CAGR
it is not only important start early…But this also start right
Views are personal: The author – Raghav S Rungta is associated with Rungta Securities Pvt Ltd. Ltd. and is the founder of the YouTube channel ‘cluelessabtfinance’
DisclaimerViews expressed are those of the author and are personal. TAMPL may or may not subscribe to it. The views expressed in this article/video are in no way intended to predict or time the markets. The views expressed are for informational purposes only and do not imply any investment, legal or taxation advice. Any action taken by you based on the information contained herein is your sole responsibility and Tata Asset Management will not be liable in any way for the consequences of such action by you. There is no guarantee or assured return under any of the schemes of Tata Mutual Fund.
Mutual fund investments are subject to market risks, read all the documents related to the scheme carefully.