Systematic Investment Plan
January 18, 2012 | In: Investment
Systematic Investment Plans are very popular in India and I have never talked about it in particular. So let us take a look towards that in detail.
What is Systematic Investment Plan
A systematic investment plan or SIP is one of the ways of investment where you invest your money in a regular or say monthly basis. Whether you invest regularly into mutual funds or directly into equities, I’d coin them both in a similar fashion. Since SIP is mostly regarded to investing into mutual funds, I’m going to focus it that way.
The whole idea of systematic investment plan or SIP is that you are going to set aside a certain sum of money each and every month to invest them in buying units of a mutual fund. You invest your money regardless of what the price of the fund is at that given point of time. Indians like this form of investment because it helps them save money on a regular basis and also helps them in building a form of investment that would give sustained returns over a period of time. All you need to do is to have an account with a broker that offers mutual funds, like HDFC or ICICI or Axis etc.
Benefits of Systematic Investment Plan
- The most important benefit of setting up a systematic investment plan is to develop a regular saving habit and discipline. Most people cannot develop the savings discipline unless forced upon and this SIP method will act like an automation force taking away part of your money each and every month. You will treat it like a burden or a loan where you have to give money regardless of how you like it. This helps you save money as well as have a good investment portfolio.
- If you do not have the knowledge of the markets and cannot time it well, investing in systematic investment plan way helps you buy into the market in all phases of time, a falling or a rising market, thus you get a good average price without taking the pain of trying to time the market.
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