SIP Investment
What is a SIP?
- Systematic Investment Plan is the act by which an investor keeps aside a predetermined sum of money to be invested in a predetermined set of funds.
- Typically, SIPs are quite a favourite with mutual funds given that the size of investments can be as small as INR 500.00 per month making them quite manageable.
- How it works is that against a customer’s authorization, certain sum of money deducted from his/her bank account and transferred to that of the fund house, the fund manager invests it in ways to maximise returns to the investor.
Advantages and disadvantages of SIP
Advantages:
- Regular & flexible investments
- Advantage of compounding effect
- Discipline in investments that results in long term benefits
- Simple, convenient and easy to monitor
- Advantage of rupee cost averaging
Disadvantages:
- Only particular sums as denoted can be saved.
- Excess amounts have to be routed separately and takes time.
- Insufficient funds in your bank account
Myths about SIP
- SIP is an investment
SIP is a mode of investment and not an investment in itself - SIP gives positive returns in the long terms
SIP is just a facilitation measure to streamline investments and make it appealing to everyone everywhere who has fixed income coming every month.
Which financial products accept SIP?
- These days, most financial products, mostly open-ended, accept SIPs
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