What is SIP? | Why should you invest through SIP? | How to start an SIP?

You must have heard of SIP But are you confused about what it really means? And how do you start it? Here’s a quick article to help you jump-start your SIP journey.

Systematic investment plan or SIP is a smart and hassle-free tool for investing in mutual funds, It is similar to a recurring deposit where you save a fixed amount regularly for a period of time. The difference is that with SIP you invest a fixed amount regularly in mutual fund schemes These schemes have the potential to beat inflation and create wealth for you in the long run.

Why invest through SIP?

Power of Compounding An SIP which continues for a longer period helps you to harness the power of compounding Small amounts invested keep adding up to create a large amount of money Do you know that by just investing rupees five thousand per month from the age of twenty five? You can create a wealth of approximately 3.2 crore rupees by the time you retire That’s the power of compounding. You can start small You don’t need to wait till you have a large amount to invest so SIP’s You can start with an amount as small as five hundred rupees a month you get flexibility SIP gives you the flexibility to choose the amount you want to invest the frequency of investing the scheme you want to invest in? And the time you want the SIP to continue you can invest either daily monthly or quarterly in the scheme of your choice based on your preference No need to time the market With SIP. You invest regularly in mutual fund schemes irrespective of market ups and downs As a result the cost of purchase is averaged out over a period of time and you don’t need to worry about timing the market It is very convenient Investing through SIP is very convenient. The amount you choose is auto debited from your bank account at the pre decided frequency So you do not need to worry about how to invest every month which in turn helps. You instill financial discipline Thus SIP helps investors get the benefit of compounding and can build wealth in the long term.

How to start an SIP?

To start an SIP You first need to get your KYC done. You can either speak to a financial advisor walk into an investor service center Contact registrar and transfer agents by cams or Karvy or visit any of the online platforms You need the following documents with you ID proof, Address proof, Past-port Size photographs and a canceled check This gets you mutual fund ready Then you can select a scheme that suits your investment objectives and risk profile After this you just need to decide on the amount frequency and time period of investment Finally you Start your SIP where in a fixed amount as Decided by you is invested in the fund of your choice from your bank account And yes, you can also stop the SIP any time you there are no penalty or charges to stop in the non run SIP investments can help you fulfill the big dreams of your life by starting small with SIP Start investing today.

Mutual fund investments are subject to market risks read all scheme related documents carefully….

Some of the special funds mentioned below:

Index Funds:

Index funds closely follow the stock indices they track. For instance, a scheme that tracks the Sensex will invest in the 30 stocks that comprise the benchmark index of the BSE. Type of Passively Managed Funds. 

ETFs:

They are essentially Index Funds that are listed and traded on exchanges just like stocks. Another type of Passively Managed Funds. 

ETF vs Index Funds: 6 Factors to Know Which is Better to Invest

Sectoral/Thematic Funds:

These are a type of Equity Funds, which invest their assets only in one focused sector/theme. Some popular sector funds are in Banking, Technology, Pharma and Infrastructure sector. More Details in Q47.

Tax Saving Funds:

Also, known as ELSS, they are a type of Equity funds, which have 3 years lock-in and your investments get tax benefit under Section 80C. More details in Q61.

International Funds:

These mutual funds invest in companies outside India. They help you to invest and get exposure to Global companies. More details in Q71.

Retirement/Children Funds:

These are solution oriented Mutual Funds in new SEBI categorization and have a 5-year lock in.

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