Systematic Investment Plan

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However, Systematic Investment Plan (SIP) helps you in savings. If you work towards them you will reach your. With SIP, you can invest fixed amount in mutual funds. By Step by Step you can invest. Therefore, you can invest over period of time. Systematic Investment Plan can invest in monthly or quarterly basis. You can view how SIP works in ELSS.

How Systematic Investment Plan works

Therefore, SIP is method of investing fixed in mutual fund scheme. Because, systematic investment plan allows buying units on given date. So that you can implement you’re saving plan. Moreover, biggest advantage of SIP is that you need not see market time.  You can see advantages of SIP investment.

Similarly, your average cost of investing and benefits. Mostly from power of compounding. Moreover, power of compounding works best as you stay invested. Probably, it helps you to earn money over year. After all, it is time in market and not timing market. It helps you to create wealth in your life.

Rather, than timing the market invest every month. You will ensure that one can invest at high and low market to make best. It is similar to regular saving scheme like recurring deposit. Probably, SIP is specific amount invested for nonstop period at regular intervals.

However, it is habit of saving and building wealth for future. Because, it is flexible and easy investment plan. Your money will be auto debited from your bank account. But invested into specific mutual fund scheme. You are billed certain number of units based on ongoing market rate. And it is called Net asset value (NAV) for day.

Benefits of Systematic Investment Plan

In addition, you invest money every time. You will purchase additional units of scheme at market rate.  So that it will added to your account. Hence, you can buy units are at different rates. So you will get benefit from Rupee Cost Averaging and power of Compounding.

Rupee Cost Averaging

Mostly, timing the market is difficult task. However, you will wait for the best time to invest. And you will try to entry into market. Hence, Rupee cost averaging allows you to opt of guessing game. Since you are regular investor. Your money searches to get more units when price is low. And you will get lesser unit when price is high.

During, market Volatile period. It may allow you to achieve lower average cost per unit. It is an automatic market timing mechanism. Here, you need not worry. About share prices or interests are headed. Probably, you can buy few units when market falls. You can buy more units when market rises.

Although, SIP does not gives you guarantee profit. It can go long way in minimizing effects of investing in volatile markets. You can monitor simple, easy and convenient. Probably, you do not have to take time to make investments. You can just submit post dated cheques with application.

To avail auto debit facility and relax. You can monitor your investment with periodic statement of account. You can study complete Systematic Investment Plan.

Power of compounding

Therefore, power of saving underlines of making money. It works if only invested at an early age. Because, it delays in investing. It is burden to meet desired goals. Probably, you can save small money regularly at an early age. Moreover, it makes money to work with major impact on wealth.

Certainly, you can plan your SIP investments regular intervals. You can invest monthly, quarter and semiannually. As above, to increase chances of buying units when price are low. SIP works best for long term investment periods. It helps to give good returns over period of time. You also see How safe is SIP investments

You can diversify your investments. Since, mutual fund investments are diversified. It not only reduces risk but also helps in optimizing returns. Mutual fund investments are subject to market risk. You have to read all scheme related documents carefully. You can see How SIP works with example.

Advantages of SIP

Once mechanism is set up. Your fixed amount will be deducted from your account. It is stress free investment. You need not worry about market timings. So if price goes down by 10 % in next month. You have to support that you are buying at less price. And after market recovers to previous level. You actually make money over all.

It encourage saving habit in you. Every month you can make to huge amount at end of 40 years. If you invest 20,000 every month in mutual fund. It gives annual returns of 20% over period of time. You can check SIP is good or bad in investing mutual fund.

Disadvantages of SIP

If price of rising doubles in first month. And it doesn’t move much after that. You won’t have handsome returns. It doesn’t make much sense to do SIP.  To keep rest of amount as cash in initial period. Since SIP averages out. You can see short term fluctuation and gives returns to long term. So you invest same amount at high market and low market.

Of course, it doesn’t generate good returns. Therefore, best returns must be generated when you buy at low. And exit at highest point. Hence, you don’t know anybody who has successfully done. But for long period. Check Risk in Systematic Investment Plan in mutual fund.

Finally, you can invest in Systematic Investment Plan easily. It is simple paperless steps to invest. You can register for an SIP through online. Hence, it is key to investing success. It makes you disciplined regular investment in your saving.

It is Systematic investing on time tested discipline. That makes it easy to invest automatically. You can invest in small amounts at regularly. So it leads to better results than investing in lump sum. You can check availability of funds in market.

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