Systematic Investment Plan (SIP) is a very popular term in India and all investors conveniently call it SIP. This is a facility offered by Mutual Funds where by investor can invest a fixed amount of money every time on a predefined interval.
Benefits of investing in Systematic Investment Plan (SIP):
- Can invest small amount- SIP can be started with an initial contribution as low as Rs. 100/- and onwards.
- Disciplined way of investing- contribute weekly/ monthly/ quarterly/ half yearly / annually.
- Auto debit same fixed amount- from your linked bank account every month/quarter/half-year.
- Benefit of rupee cost averaging- as you buy on fixed dates automatically, you need not worry of market fluctuations. Risk is reduced in SIPs as you will get opportunity to buy at both lower & upper market levels and your cost of buying will average out.
- Compounding effect- small contributions every time will add to big principal, plus you get better returns over time which in total will sum up to higher corpus.
- Starting early- as you can invest small amounts (starting from Rs. 100/- per month) you can start at early age, contribute for long tenure and also stay invested even if you have completed regular investing.
- While you commit to invest for certain months/years, you can stop whenever you want. You can also extend your SIP tenure. Even though you stop contributing regularly, you can still stay invested with the corpus you have already created.
- Parents can start in the name of minor also.
- You can select any mutual fund and any scheme to start SIP. Even you can do SIP in ELSS funds for tax savings purpose.
- Convenience – you can start a SIP easily via your bank or directly from mutual fund companies. Now a day most banks and other Fintech companies offer SIP facility through their mobile application. Even redemption is also possible online.
- Goal based savings such as education corpus built-up, retirement corpus built-up, house/car purchase, marriage corpus built-up etc. can be started via SIP
What is Top-up SIP? Top-up Systematic Investment Plan (SIP) is an advance version of SIP. Top-up SIP allows you to increase you SIP contribution by a fixed amount or percentage at a pre-defined interval/time. If you want to contribute more with increase in your income/salary them you can opt for Top-up SIPs.
All other facilities of Mutual Funds are the same for Systematic Investment Plan (SIP).