What is ‘SIP’ ?
Simply put, a SIP refers to Systematic Investment Plan which is mode of investing in mutual funds in a systematic and regular manner. The method of investing is similar to your investment in a recurring deposit (RD) with a bank, where you deposit a fixed sum of money (into your recurring deposit account), but the only difference here is, your money is deployed in a mutual fund scheme (equity schemes and / or debt schemes) and not in a bank deposit, and hence your investments (in mutual funds) are subject to market risk.
A SIP enforces a disciplined approach towards investing, and infuses regular saving habits which we all probably learnt during our childhood days when we used to maintain a piggy bank. Yes, those good old days where our parents provided us with some pocket money, which after expenditure we deposited in our piggy banks and at the end of particular tenure we saw that every penny saved became a large amount.
SIPs too work on the simple principle of investing regularly which enable you to build wealth over the long-term. In case of SIPs, on a specified date which can be on a daily basis, monthly basis, or on a quarterly basis, a fixed amount as desired by you, is debited from your bank account (either through a ECS mandate or through post-dated cheques forwarded) and invested in the scheme as selected by you for a specified tenure (months, years).
Benefits of SIP
- SIPs are light on the wallet
SIPs enable you to invest in smaller amounts at regular intervals (daily, monthly or quarterly). This in turn reduces your burden of defraying a lump-sum – at one go – from your bank account.If you cannot invest Rs 5,000 in one shot, that’s not a huge stumbling block, you can simply take the SIP route and trigger the mutual fund investment with as low as Rs 500 per month.
- SIPs make market timing irrelevant
SIPs can help you manage (even-out) the market volatility well. Timing the market can be hazardous to your wealth and health. Instead focus on ‘time in the market’ in the endeavour to create wealth by selecting the best mutual fund scheme to invest.Studies have repeatedly highlighted the ability of equities to outperform other asset classes (debt, gold, even real estate) over the long-term (at least 5 years) as also to effectively counter inflation.Now one may ask: If equities are such a great thing, why are so many investors complaining? Well it’s because they either got their stock or the mutual fund wrong or the timing wrong. In our opinion both these problems can be solved through a SIP in a mutual fund with a steady track record, stay invested for the long-term as the SIP route enables you to even-out the volatility of the equity markets effectively.
- SIPs enable rupee-cost averaging
Many a time, a SIP works better as opposed to one-time, lump sum investing. This is because of rupee-cost averaging. Under rupee-cost averaging you would typically buy more of a mutual fund unit when prices are low, and similarly, buy fewer mutual units when prices are high. This infuses good discipline since it forces you to commit cash at market lows, when other investors around you are wary and exiting the market.
- SIPs benefit from the power of compounding
As SIPs subscribe you to the habit of investing regularly, it enables you to compound your money invested. So, say you start a SIP of Rs 1,000, in a mutual fund scheme following prudent investment system and processes, with a SIP tenure of 20 years and expect a modest return of 15% p.a., your money would grow to approximately Rs 15 lakh.So, over the long-term, SIPs can compound wealth better and systematically as opposed to investing a lump sum, especially when the journey of wealth creation is volatile.
- SIPs are effective medium for goal planning
All of us have financial goals – may be buying a house, buying a dream car, providing good education to children, getting them (children) married well, retiring etc. But all this comes with systematic financial planning. Very often many invest in the equity markets, with a motive of making short-term gains, and often ignore to use the equity markets as a window for long-term wealth creation, in order to achieve one’s financial goals. You can effectively achieve your financial goals by enrolling for SIPs. The earlier you start the better it is.
How to start a SIP?
Well, you have broadly two ways: offline and online.
Here’s what you need to do to start a SIP Offline
- Select a mutual fund scheme that best suits your needs, investment objectives, financial goals
- Fill in the Common Application Form / SIP form carefully and completely mentioning the name of the scheme and other details
- Provide your NACH mandate form mentioning all you SIP details
- If the KYC is not done, fill in the KYC form and comply with it
- Hand over the forms (as mentioned given below address)OFFICE NO 7 RAM COMPLEX,
315 NIMISHA HOTEL MARKET,
JAIL ROAD OPPOSITE NAINITAL BANK,
Here’s what you need to do to start a SIP Online
- Select a mutual fund scheme that best suits your needs, investment objectives, financial goals.
- Click the INVEST ONLINE tab and follow the step one by one.
Now invest in Mutual Funds from the comforts of your home or office. For any other information please feel free to call Mutual Fund Zaroori Hai at +91- 8738864122 or +91-8081058765 or contact us.