A Quick Guide To Systematic Investment Plan

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The Systematic Investment Plan or SIP is the most preferred and disciplined investment plan when it comes to investing in mutual funds. Although this makes investing in stocks much convenient, one needs to have a clear understanding of the SIP in order to understand their investment needs and generate capital gains on investments.

Here is a quick guide to some basic questions and answers related to SIP's which will help you make a better investment.

What does the term SIP mean?

An SIP or Systematic investment plan is a tool which allows an individual to invest capital in mutual funds at regular intervals of time. The time period can be weekly, monthly and also, quarterly. A certain amount is debited from your account according to the term allotted and also the amount if fixed beforehand. SIP is a flexible investment plan and you can change or stop them whenever you wish to.

Why should you prefer an SIP?

The best part about selecting an SIP or Systematic investment plan is it makes you financially secure and stable at the same time you do not end up paying huge sums in the name of investment. Also SIP's are not market dependent.

What are the different types of SIP's?

SIP is classified into four major types namely:

  • Top-up SIP
  • Flexible SIP
  • Perpetual SIP
  • Trigger SIP

How does one benefit from SIP's?

SIP's provide higher returns at a low purchase cost. One major benefit of this investment is that it does not have any lock in period thus making it more flexible. However, it is often advised to invest for a longer term to gain maximum returns. Also, the risk factor associated in this type of investment is often moderate and thus you do not end up losing all your capital in adverse situations.

What is the minimum amount to invest to start it?

While most SIP's are targeted for investing a fixed amount of money in the given durations sometimes they can also be altered. One can invest with amount as low as Rs. 500 in a mutual fund scheme through SIP.

Why should one invest in Systematic investment plan?

Since this investment plan works on minimum investment and has lower market risk, they are best for new investors. When started early an SIP can give major benefits with minimum capital and risk to ensure a steady income from your investment.

© 2019 Peter Miller, Financial advisor. 12 Pike St, New York, NY 10002
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