An SIP is a mode of mutual fund investing that helps you to invest regularly to meet your financial goals effectively. 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 few interesting facts on SIP plans in India.
One of the biggest difficulties in equity investing is; when to invest or where to invest? While investing in a mutual fund solves the issue of where to invest, SIP plans help us to 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 lumpsum investment and go for a staggered investment, thus balancing your portfolio. This makes timing the market irrelevant.
In SIP plans, one starts investing a fixed amount regularly. Therefore, one ends up buying more units when the markets are down and NAV is low and less number of units when the markets are up and the NAV is high. This is called rupee cost averaging.
If you are not well versed with the swings of the market, it would stay away from making ill-timed investments with a one-time investment. It would be better to avoid lumpsum investments when the markets are rising. Starting an SIP tends to average out the cost of your investment portfolio as you buy even when the markets are low, which is the best time to buy.
Compounding is the ability of your investment to generate earnings, which are then reinvested to generate their earnings. In simpler words, the returns you will earn from your invested amount will be re-invested, and thus increase 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 monthly and how would your investment compound over the years.
SIP plans allow us to invest very small amounts (starting from Rs. 500/-), as against 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. SIP plans, therefore, become one of the ideal investment options for a small-time investor, who would otherwise not be able to enjoy the benefits of investing in the equity market.
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 on rankings and ratings. While investing, it would be advisable to have a long-term approach and select the fund whose investment objective matches your financial goals and needs. Do consult your financial advisor for assistance.
Disclaimer: The views expressed here in this Article / Video are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. Quantum AMC / Quantum Mutual Fund is not guaranteeing / offering / communicating any indicative yield on investments made in the scheme(s). The views are not meant to serve as a professional guide / investment advice / 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 views given are fair and reasonable as on date. Readers of the Article / Video should rely on information/data arising out of their own investigations and 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, their Affiliates or Representative shall be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary losses or damages including lost profits arising in any way on account of any action taken basis the data / information / views provided in the Article / video.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
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