What is systematic investment plan

Systematic Investment Plan is referred to as SIP. This approach involves consistently investing funds in mutual funds over a longer period of time. The instructional procedure is automated and begins with a monthly minimum payment of 100 rupees. SIP amount can be determined according to someone’s income or earnings. For the best return, this could be of a long-term investment. The “Start Early, Invest Regularly” maxim is the foundation of SIP. SIP is well-liked by investors because of its ease of use, low cost, and possibility to generate money over the long run.

In Short:

• • What is systematic investment plan.
    • How to invest in systematic investment plan or SIP
  • Key Features
  • How does systematic investment plan (SIP) work, Understand through an Example
  • Types of systematic investment plan (SIP)
  • How does systematic investment plan work
  • How to invest in systematic investment plan or SIP | Features & Benefits of SIP

Also Read: Top 10 Best Savings Plans In India, Savings Plans or saving programs, tax saving investment plan in india

What is systematic investment plan | Key Features

1. A systematic investment strategy is one in which a fixed amount of money is invested on a regular basis, generally in the same securities.
2. Typically, a SIP deducts automatic payments from the funding account and may necessitate longer-term investment commitments.
3. The dollar-cost averaging method underpins SIP operations.
4. SIPs are available from most brokerages and mutual fund firms.

How does systematic investment plan (SIP) work,  Understand through an Example

Let’s have an example to understand the SIP procedure or methodology towards investing. Post deciding to invest Rs 1,000.00 monthly in an equity mutual fund. In the very first month, amount of 1,000.00 will be deducted from the linked bank and invested into the corresponding mutual funds. The process continues every month. once the market is up, buy fewer units of the mutual fund with Rs. 1,000.00 and buy more units during it’s fall down. This unit’s allocation will chase each month and will add to portfolio and return handsome amount.

Types of systematic investment plan (SIP)

1. Regular SIP
2. Top-up SIP
3. Flexible SIP
4. Trigger SIP
5. Perpetual SIP
6. Multi SIP
7. SIP with Insurance

How does systematic investment plan work

1. Set Up: The investor must first choose a mutual fund plan, then determine how much to invest and how often (monthly, quarterly, etc.) to link their bank account to the SIP. The amount that is automatically withheld will be after a bank link.

2. Investment: A predefined sum will be taken out of the associated investor’s bank account on the specified date. These sums will be allocated to the mutual fund plan of choice. The mutual fund’s units are distributed according to the current Net Asset Value (NAV).

3. Compounding: Over time, the investor’s money generates profits that are then reinvested in the program. Compounding is the name given to this reinvestment procedure. Thus. Wealth accumulation is accelerated as returns begin to provide returns.

4. Regular Contribution: Sip is an investment that is made on a regular basis. Investors may make periodic fixed contributions based on the state of the market. The fixed investment amount purchases more units in bear markets and less units in bull markets.

5. Long-term Investing: SIP is intended for the procedure of long-term investing. It motivates investors to make even smaller, longer-term investments. Similarly, investors stand to gain from rupee cost averaging and compounding, which might lead to better returns.

Features & Benefits of SIP

1. Frequent Investment: Investors can use SIP to make frequent, monthly or quarterly investments of a predetermined amount of money. Because this investment is automated, on the designated day, a predetermined amount will be automatically withheld from the linked bank.

2. Investing with discipline: SIP SIPs promote disciplined investing by giving clients access to an automated investment procedure. Regular investment helps investors to establish an organized financial lifestyle and a saving habit.

3. Rupee Cost Averaging: SIP is based on the rupee cost averaging, which implies that it purchases more mutual fund units at low market prices and less units at high market prices. As a result, it aids in gradually averaging the cost of investment.

4. Benefits of Compounding: SIPs gain from the compounding effect. Investors get a return on their investment over time if they keep making regular investments. A long-term investment produces a large increase in wealth.

5. Flexibility: SIP offers all investors flexibility. It is adaptable in terms of duration, frequency and amount to be invested. The amount invested may be changed, as per the frequency of investment or investor’s feasibility, it is not penalized in case of discontinuation at any time.

6. Affordability: Because SIP enables small-dollar investments, a wide spectrum of investors may take use of it. Investors may also begin making bets with only hundred rupee. Even individuals with minimal funds may pay and complete this investing procedure.

7. Diversification: By putting money into a number of mutual fund services, SIPs assist investors to add variety to their investment portfolios. By spreading out the risk of investments, diversification aids in obtaining the best possible returns.

8. Convenience: As Sips automate the investing process, they are incredibly easy to utilize. There’s no need to worry about it after you’ve set it up. Every month, it will be automatically handled.

9. Lengthy-Term Wealth growth: Because SIPs promote investing over lengthy periods of time, they are ideal for long-term wealth growth.

Continue : Part II

ICICI – SIP Plan