What are the facts of SIP plans in India?
An SIP is a type of mutual fund investment that allows you to invest on a regular basis in order to effectively meet your financial goals.SIP plans allow you to invest a stipulated amount in a particular mutual fund scheme at a specified frequency. It may be daily, weekly, fortnightly, monthly, or quarterly, depending on your choice…
Let’s take a look at a few interesting facts about SIP plans in India.
- Market timing becomes irrelevant.
One of the biggest difficulties in equity investing is when to invest and where to invest. While investing in a mutual fund solves the issue of where to invest, SIP plans help us overcome the problem of when to invest.
SIP plans involve disciplined investing irrespective of the state of the market, as SIP investors buy even when the markets are low. When the markets are bullish, it may not be prudent to commit a lumpsum investment and opt for a staggered investment, thus balancing your portfolio. This makes timing the market irrelevant.
- It reduces the average cost.
In SIP plans, one starts investing a fixed amount regularly. Therefore, one ends up buying more units when the markets are down and the NAV is low and fewer units when the markets are up and the NAV is high. This is called rupee cost averaging.
If you are unfamiliar with the market’s swings, it is best to avoid making ill-timed investments with a one-time investment.It would be better to avoid lump-sum investments when the markets are rising. Starting an SIP averages out the cost of your investment portfolio as you buy even when markets are low, which is the best time to buy.
- Compounding power
Compounding is the ability of your investment to generate earnings that are then reinvested to generate more earnings. In simpler words, the returns you will earn from your invested amount will be re-invested, thus increasing your principal amount. Starting a Systematic Investment Plan (SIP) will help to grow your investment with the power of compounding as you invest a fixed amount every day, week, month, etc. You can use a SIP plan calculator to find out how much to invest each month and how your investment will compound over the years.
- It does not strain our day-to-day finances.
SIP plans allow us to invest very small amounts (starting from Rs. 500/-) as against a larger one-time investment if we were to buy directly from the market. This makes investing easier on our wallets due to the flexibility in the ticket size. Small-time investors who would otherwise not be able to enjoy the benefits of investing in the equity market have become one of the ideal investment options for small-time investors.
If you wish to accumulate your savings prudently, you might opt for a larger SIP amount.
However, it is advisable to research before starting SIP plans for 1 year or a longer duration in a mutual fund. Do not select a fund merely based on rankings and ratings. While investing, it would be advisable to have a long-term approach and select a fund whose investment objective matches your financial goals and needs. Do consult your financial advisor for assistance.
The views expressed here in this article or video are for general information and reading purposes only and do not constitute any guidelines or recommendations on any course of action to be followed by the reader. Quantum AMC/Quantum Mutual Fund does not guarantee, offer, or communicate any indicative return on investment in the scheme(s).
The views are not meant to serve as a professional guide or investment advice or intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader. The article/video has been prepared on the basis of publicly available information, internally developed data, and other sources believed to be reliable.
Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and the views given are fair and reasonable as on date. Readers of the article or video should rely on information/data arising out of their own investigations and are advised to seek independent professional advice and arrive at an informed decision before making any investments.
None of the Quantum Advisors, Quantum AMC, Quantum Trustee, or Quantum Mutual Fund, or their Affiliates or Representatives, shall be liable for any direct, indirect, special, incidental, consequential, punitive, or exemplary losses or damages, including lost profits, resulting from any action taken based on the data, information, or views provided in the article/video.
Mutual Fund investments are subject to market risks. Read all scheme related documents carefully.
- 10,000,000 XOF in one spin: AfroPari player from Côte d’Ivoire hits the jackpot
- ADANSEFOƆ MMERƐ NO NIE (EPISODE 73)
- Davido’s ‘Timeless’ album clinches silver certification in the UK.
- White shorts continue to affect women’s performance and involvement.
- Don’t let social media deceive you, I mean AI. – Odansefo Yosef Ampadu
Source: ArticlesFactory.com
About the Author
