![]() Top-up SIPįor investors who desire to periodically raise their SIP contributions, top-up SIPs or step-ups are ideal. While the term, amount and frequency can be customised when investors start the SIP online, they cannot alter the amount invested. Also known as regular SIP, investors need to select a scheme, the amount to invest and the time frame to keep investing in fixed SIPs. This is the most basic way of investing in mutual funds through an SIP. This notification usually specifies the number of units depending on the NAV that you have been allotted. This way, you aren’t in two minds before linking it with your bank account.įurther, the Asset Management Company (AMC) will notify you once the SIP is debited. SIP registration comes with the flexibility of pause, stop and resume, in case required. Stage 3 - Now start your SIP investment by registering for a regular automated payment via your registered bank account and make sure your SIPs get deducted as directed. Stage 2 - Sign up for the SIP, for which you have to choose a starting amount you want to invest consistently, the period you want to invest in that plan, and the interval type - weekly, monthly, quarterly, half-yearly or annually. Stage 1 - With thorough analysis or advice from a market professional, select a mutual fund scheme you wish to regularly invest in. Investing through an SIP majorly involves three steps. How does SIP Work? Image: Courtesy of Tima Miroshnichenko/Pexels ![]() The power of compounding works wonders in mutual fund investment, and with SIP, it gives better results with relatively less risk.ĭisclaimer: Mutual funds are subjected to market risk, choose wisely and consider taking professional help before investing in any scheme. This not only helps the money grow better in terms of absolute returns but also helps investors turn small contributions into a big corpus fund. The amount invested in a mutual fund through SIP is subject to compound interest just like a lump sum investment in any mutual fund. Additionally, it allows financial independence to the investors along with inculcating a trait of saving before spending. This helps investors build a cumulative principal amount that gets saved and invested at the same time. Financial consciousnessĪn SIP promotes the habit of regular saving and investing. So, SIP helps in dealing with this fluctuation where the price per unit is averaged with regular investing. The following month, they might get 16.50 units for the same amount due to decreased NAV. This way, an SIP helps investors average the net asset value (NAV) of these units, which reduces the risk of loss associated with your investment.įor example, with an investment of Rs 1,000 every month in a mutual fund, investors might get 15 units in one month and 13.50 units in another. Meaning, an investor receives fewer units when the market is rising and more units when the market is falling. These regular intervals can be weekly, monthly, quarterly, semi-annually or annually.įor example, if you want to invest Rs 1,000 for 12 months in a mutual fund, you can simply automate this by registering for a SIP on any specific date of your choice - just like you would do for recurring deposits which you create with a bank.īenefits of investing in mutual funds through SIP Rupee cost averagingīy minimising the guesswork associated with market performance, SIPs help investors deal with market volatility because the average cost of purchases is edged out over time with regular investing. ![]() Here, investors deposit a fixed sum over regular intervals to reap benefits in terms of interest incurred on investment. Simply put, a systematic investment plan works like a virtual piggy bank. What is SIP? Image: Courtesy of Monstera/PexelsĪ SIP enables anyone to invest in mutual fund schemes where they can schedule automatic deductions of payments on a regular basis. So, let’s delve deeper into all its aspects. However, there is much more to SIP investment than just this. ![]() And that’s where a systematic investment plan (SIP) comes in, which ensures that an investor religiously saves and invests their money in mutual funds over a period of time. Disciplined investing is what many of us struggle with and no matter how hard we try, it takes time to develop a habit.
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