A systematic investment plan (SIP) is a way to invest in mutual fund regularly. The idea behind this is to set apart the sum of amount every month or periodically and use that corpus to buy unit of the particular mutual fund. It allows investor to invest gradually in small amount, instead of asking for a large chunk of money thereby it inculcates financial discipline to the investor.
SIP may be termed a smart choice of investment for an investor.
It average out the cost of investment hence reduces the risk. E.g. If invested Rs.1000 every month and the scheme invested in is available at Rs.20 per unit. Then in month 1, will be able to obtain 50 units. And In 2nd month again invested Rs.1000 but this time If the per unit values goes down by Rs. 10. Then will be able to obtain 100 units. So in 2 month one can take benefits of 150 units. But If we invested Rs. 2000 in a month for a particular scheme which is available at Rs. 20 unit, the will be able to obtain 100 unit only. So it is advisable to small investor that to invest in SIP is more beneficial the any other investment option. As it is reduce the risk and average out the cost to superior returns.
It also allows investor to invest gradually as like as recurring deposit. It can give higher return if invested for long term. One major difference is that short term SIP is more risky so it is advisable to invest in long term SIP. In mostly investment option investor watch the market very carefully to make benefit but SIP not required to watch the market trends, so it is easily acceptable to small investor as well as all category of investor.
Benefits of SIP- Independent of the market and regular saving habit. Better way of wealth creation. Due to its flexibility it become the more attractive and affordable way of investment in mutual fund through SIP among all category on investor.
For more information please visit: – http://en.wikipedia.org/wiki/Systematic_Investment_Plan
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