Investing in the stock market has lots of ways. People are confused where they need to invest. Number of options available in the market. There is one option: SIP Investment. SIP stands for Systematic Investment plan. SIP is an investment option where you need to invest a fixed amount monthly or as per your choice you can invest weekly, quarterly.
Table of Contents
- What is SIP Investment ?
- Advantages of SIP
- Disadvantages of SIP
- How to start investing in SIP
Definition of SIP
SIP is an investment plan which allows you to invest a fixed amount of money in a mutual fund on a regular basis. You can invest monthly, quarterly or annually
How does SIP work?
SIP works on rupee cost averaging principle. That means you invest a fixed amount of money on a regular basis. As per market conditions, when the market is down you buy more quantity and when the market is up you buy few quantities.
Types of SIP
There are two types of SIP, one is Equity and another one debts.Equity SIP invest in stocks while debt SIP invest in debts such as Bonds and government securities.
Advantage of SIP
SIP is an easy investment strategy, it is a fixed amount of investment on a regular basis. You can convert manual to autopay mode which means every month your amount will be deducted automatically.
SIP is low cost investment , you can start SIP investment with Rs 500 only. The charges are also low compared to other investments .
Rupee cost Averaging
SIP works the principal of rupee cost averaging, that means you will invest your amount on a regular basis and as per market condition you will buy quantities of stocks. If the market goes down you buy more quantity , if the market goes up you buy a few quantities .
SIP also offers tax benefits under section 80c of the income tax act, you can claim your tax deduction up to 1.5Lakh.
Disadvantages of SIP
SIP is subject to market fluctuations, if the market goes down your investment value may decrease.
No guarantee of returns
SIP does not give guarantee of returns ,the returns of investment depends on market fluctuations and performance of mutual funds.
SIP provides slow growth as per different investments. But it is good for long term investment. It takes some time to increase your investment.
How to start investing in SIP
Choose the right mutual funds
The first step to start investing in SIP you need to choose a Mutual fund, it is important to choose the right mutual fund. For choosing the right mutual fund there are various factors like previous performance, expenses ratio, fund manager experience etc.
Selecting the investment amount
You need to select your investment amount, which is monthly you invest in SIP. so as per your investment goal select investment amount.
Choosing the investment tenure
You should choose your investment tenure as per your investment goal. You can choose long term or short term depending on your investment goal.
Submitting the required document
To start investing in SIP you need to submit your documents like identity proof, address proof, and bank details. After your document verify you can start investing in SIP.
SIP is a great opportunity for investors who want to invest money and achieve their investment goal. You can receive the benefit of compound returns. It is one of the great options for the new investors. To start investing in SIP you need to choose the right mutual fund , select your amount and time and start investing in SIP.
- You can start SIP investment with Rs 500 only
Yes, you can change the investment amount or tenure in SIP as per your investment goal.
SIP is a safe investment option as it invests your money in mutual funds. It follows SEBI rules.
- You can monitor your SIP investment in your mutual fund’s website or mobile app.
Lump sum investment is a one-time investment, whereas SIP invests your money at regular investment.