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SIP(Systematic Investment Plan)

What is SIP?

 

A Systematic Investment Plan, more popularly known as SIP, is a facility offered by mutual funds to the investors to invest in a disciplined manner. SIP allows an investor to invest a fixed amount of money at pre-defined intervals in the selected mutual fund scheme. The fixed amount of money can be as low as Rs. 100, while the pre-defined SIP intervals can be on a weekly/monthly/quarterly/semi-annually or annual basis. By taking the SIP route to investments, the investor invests in a time-bound manner without worrying about the market ups and downs and benefits in the long-term due to average costing and power of compounding. 


Benefits of SIP Investing
Power of Compounding
When you invest regularly through SIP and invest for the long term, the benefits are magnified by the compounding effect. Compounding effect ensures that you earn returns not only on your principal amount (actual investment) but also on the gains on the principal amount i.e. your money grows over time as the money you invest earns returns. And the returns also earn returns.

Rupee Cost Averaging
When value of your fund which is selected for SIP goes down, more no. of units of that mutual fund are bought. Over a period of time when price of your mutual fund increases, your portfolio value also increases.

SIP amount flexibility
After starting any SIP in a particular mutual fund investors can increase their SIP amount as per their convenience. Also investors can reduce their SIP amount in future if they feel pressure on their pocket or due to any reason.

Tax benefit
ELSS(Equity Linked Saving Scheme) option in a mutual fund allows investors to get benefit of income tax exemption by showing investment under section 80C.


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