Systematic Investment Plan
SIP is investing a fixed sum periodically in a disciplined manner for long term. It gives benefit of Rupee Cost averaging. SIP is a method of investment in mutual fund scheme, which helps to achieve financial dreams by investing small amount periodically (monthly or querterly) to create wealth to an investor. With SIP, an investor invests a fixed amount in mutual funds, monthly or quarterly for a period of time. The prices of shares changes on their every buying time. The up and down purchase NAV results averaging out his cost of investing and benefiting from the power of compounding. Due to periodically investment it minimizes the market risk, benefiting the rupee cost averaging and return of market growth.
How SIP works?
Prediction of market is not easy to any investor. Due to this, when to enter into market market to make profit, is very difficult. SIP helps to overcome from this problem, because SIP is a method of investing a fixed amount regularly, in a mutual fund scheme whether market is lower or higher. SIP allows an investor to buy units on a given date of each month, so that one can implement a saving plan for themselves. The biggest advantage of SIP is that one need not time the market.
How to Invest?
Before investing an investor should make his financial goal. Decide about his need of funds and the investment period, risk capacity. Now he can choose a scheme which is best suited to him. If he has long period he can choose equity funds, if his time period is medium, can choose debt funds and if time period is short he can choose liquid funds.
If an investor is new for mutual fund, first time he will need to complete KYC (Know Your Customer) requirements. For this he will need to provide copy of ID proof (PAN card), address proof, one passport size photograph an KYC form along with his application form for investment. KYC form need only once. Now an investor can invest a pre-determined fixed amount in a scheme every month or quarterly, depending on his convenience through post-dated cheques or through ECS (auto-debit) facility. Investors need to fill up an Application form and SIP mandate form on which they need to indicate their choice for the SIP date (on which the amount will be invested). Subsequent SIPs will be auto-debited through a standing instruction given or post-dated cheques. The forms and cheques can be submitted to the office of the Mutual Fund / Investor Service Centre or nearest service centre of the Registrar & Transfer Agent.
If you want to plan for monthly investment, a return planner of systematic investment plan is given here. SIP Planner