Short Term SIP – A Bit More
What is Systematic Investment Plan (SIP)?
SIP (Systematic Investment Plan) is time-honored, simple, and a disciplined investment strategy that helps in building your wealth over a long-time period. It is an economical way of investing a fixed amount for a continuous period in a mutual fund at regular intervals. Monthly, and quarterly are the options for you to take the pick whilst investing in a SIP.
Now, back to the grind. Why SIP is Best?
When it’s about investing in mutual funds, you get endless advantages from all corners. SIP not only help to become wealthy, but also create a win-win situation for the investor.
- The Habit of Saving: One of the benefits of SIP is it helps in building the habit of investing and saving simultaneously. It gives a feeling of commitment to the investor for keeping a fixed amount aside every month; the amount can be as low as INR 500. In short, you don’t feel the burden on your shoulders. The entire perspective towards investing and saving has changed by SIP.
- Financial Objectives: If there is no plan for managing the expenses, then it becomes a tedious job to grab the things you are looking forward to. This is true for life goals as well. You may have thought of going on an exotic vacation or buying a house. But don’t know where to proceed from. Taking care of this, SIP help in many ways whether it’s a long-term goal or short-term. Since the overall process of SIP is disciplined and goal-oriented which keeps you on the right road. Possibly, in the case of open-ended funds, you end up enjoying liquidity.
- Diversification: Instead of putting money in just one asset, it’s better to assign it in different classes. For example: If it’s within the same asset class (like equity funds), better to own 4–5 different ‘equity funds’ in your portfolio. This is known as diversification. It helps in spreading the investment amongst numerous securities for reducing any sort of fluctuations in returns.
- Rupee cost averaging: This is one of the most vital parts of SIP investing. A SIP investment allows you to take advantage of rupee cost averaging. Let’s understand the concept. NAV prices fluctuate daily. So, better to make a bulk investment, one should invest regularly. You will buy more units if the NAV prices are lower and fewer units when the NAV prices are high. Thus, increasing the overall returns of your portfolio.
How to pick the best SIP plans online?
Things to keep in mind:
- The chosen mutual fund must be in market from the last 5 years
- The mutual fund you are planning to invest must be operated by your bank. Cross check the information before proceeding.
- The fund house chosen by you must be recognizable and reputable.
- The total size of the corpus or asset should be huge.
- Check the plans & avoid which involves risks such as low-liquidity and volatility.
- Opt for the funds having good ranking & credited by CRISIL rated funds.
*Disclaimer: investment in securities market are subject to market risks, read all the related documents carefully before investing