Systematic Investment Planning, as the name suggests, allows you to invest systematically at regular intervals in your favorite mutual fund schemes. The amount is fixed for each investment and so are the time duration and the scheme. The amount is automatically deducted from your saving account. This means you have a chance of streamlining your income and savings and maintain financial discipline. As one-time investment is not necessary, you will have sufficient time to save for the next investment.
The following are the advantages of choosing SIP investments over other schemes.
- Invest according to your convenience. The amount can be as low as Rs. 500/- per investment.
- The time period can be weekly, monthly, or quarterly, depending on your income and expenditure.
Rupee cost average
- You can buy more units when the market is low and reduce the units when the cost is high.
- Pay in smaller amounts over a while and get greater benefits.
- It is easy to spread the accumulation process through the years rather than trying to arrange a huge amount of money in short notice.
- The one-click withdrawal SIP allows you to withdraw money in case of emergencies.
Become a regular investor
- The timely investments will turn you into a regular investor who can handle his/ her finances without too much effort.
- The duration of the Systematic Investment Planning is something you will have to decide, keeping in mind the tax laws, market risk, and returns.
- Do your research by keeping a 5 or 7-year point of reference and studying the market fluctuations and returns.
There are certain points you need before you go ahead with Systematic Investment Planning.
- Purpose of investment
- The amount, time duration, and tenure of the scheme depend on the purpose of your investment.
- Are you investing for your child’s future education? Are you investing for your retirement? Or, are you investing for any emergency situations you think may occur in the distant future?
- Decide the purpose and then move on to finalize the rest of the details.
- The reputation of the fund house
- This is one of the most crucial points when deciding SIP investments.
- Read about various companies, ask questions, talk to other investors, study the trends and growth chart of the top companies and compare the investments.
- Invest in companies that can handle market fluctuations better than others.
There are four types of Systematic Investment Plans:
- Top-up plan- Increase the investment amount periodically.
- Flexible plan- Increase and decrease the investment amount as per cash flow.
- Perpetual plan- No end date that allows anytime withdrawal.
- Trigger plan- A speculative plan that is ideal with investors with limited knowledge of the financial market.
The process of investing is hassle-free. You need not be an expert in managing the markets.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.