A Detailed Guide on Systematic Investment Plans

SIPs have been popular in the market for a long time now. However, there are many who do not understand SIPs completely. If you find yourself wondering what a SIP is and how does it function, then you are in the right place. This article will give you an insight about SIP in detail.

Debunking SIPs for you

First of all, it is not uncommon to come across the opinion that SIPs are nothing but mutual funds. Most of the people and investors believe that mutual funds and SIPs can be used interchangeably. However, this is not a true fact to believe.
The first thing to know here is that mutual funds and the SIPs are different. SIPs are merely tools that allow you to invest in mutual funds regularly. With the help of SIPs, you can ensure to make regular investments without any worries.
SIPs help you to stagger your investments. As most of the experienced and learned mutual fund advisors would tell you, investing a lump sum of money in a mutual fund is not beneficial for you. Regular investments will get you more benefits. SIPs are the best tools to help you invest your money in the right places at the right times.

Why should you use SIP?

Since we already know that SIPs help you to invest your money in mutual funds regularly, you can find the maximum benefit from the same. This allows the investor to regularly invest in various types of mutual funds, usually an equity mutual fund scheme.
SIPs are one of the simplest methods to keep your investment high and functional. You do not have to worry about the market, indexes, and many other things. If you are worried about your investments, you have nothing to worry about with SIP. SIPs regularly invest the money for the time period you wish it to function for automatically.

How much money is required for SIP?

When you decide to invest in SIPs, you need to remember that you do not have to invest a large sum of money over the years. However, a minimum of INR 500 must be deposited. Apart from that, the upper limit for SIPs can be as per your choice. You could invest in one or more SIPs or choose to invest higher in one single SIP, the choice is completely yours.

How to find the best SIP plans for long term and short-term SIPs?

SIPs are simple when you come down to it. There is hardly anything complicated about it. However, when you decide to invest in a SIP, you need to know that SIPs can be decided as per your requirement. Your long-term goals and short-term goals will help you to know if you which SIPs to go for. If you are looking for the best SIP plans for long term or for short term SIP options, then here is how to do so:

  • Firstly, know your requirement. Understand why you need to make an investment and the money you have to invest. Hence, set your financial goals.
  • Next, you need to make sure that you know which fund house to choose. Choose the one with high performing SIPs and a good manager.
  • You should consider the current market trends, and understand if your chosen SIP is stable or not.
  • Lastly, you need to consider how much money you would like to invest every month.

With that in mind, make sure that you fill out the forms with the correct details for the SIP account.

Are SIPs customizable?

When you invest in SIPs, you need to ensure that you know that what you are investing in. Furthermore, always remember that SIPs can be customized as per your choices and needs. You can invest in the SIPs:

  • Monthly,
  • Bi-monthly, and
  • Fortnightly.

An investor can look for the options that suit them the most and choose to end the SIP when you meet your financial goals.

Some Common Myths

  • Investors believe that SIPs are only for the small investors whereas, in reality you can invest large amount of money as well. However, this has to be divided into different amounts.
  • SIPs and mutual funds are not the same thing which is often confused. Precisely, SIP is a tool to help you regularly invest in mutual fund schemes of your choice.
  • Enrolling for SIP means that you are enrolling through NACH (National Automated Clearing House) mandate from NPCI (National Payments Corporation of India). Since your bank account details are already mentioned, the money is deducted from the balance of your account. Even if you miss a couple of instalments or payments, you have nothing to worry about. You see it is not like loan EMIs where you will be penalized to miss out on a payment. Even if the account balance is not maintained, the folio number remains active.

What else is there to know about SIPs?

  • There are different types of SIPs in the market. You need to make sure that you find the scheme that suits your financial requirements.
  • You should consider taking care of your requirements through research. Make sure that you look at the market, as well. Just because SIPs are easy to handle does not mean that you can ignore the market.
  • You should make sure that the fund house that you choose has a good reputation, or else you may end up losing your money or getting low returns.
  • Also, make sure that you have an eye on the recurring expenses and maintenance charges of the same. High recurring charges will only reduce the number of returns you enjoy later.
  • Understand how the return rates affect your investment. Before you make a choice and invest in SIPs, you should consider learning about return rates at first. Calculate the interest rates, and find what you would get beforehand through SIP calculator.

SIPs can be used to meet many investment goals. You can plan your retirement or you could make use of the money to buy a car, the applications are many. You can find various options, and different schemes to get better results. Always remember to set a financial goal first, and then you should make a wise choice accordingly.