What is SIP?
SIP investment or Systematic Investment Plans by mutual fund companies is a facility that allows investors to invest a fixed amount of money at predetermined intervals towards a mutual scheme. Over time, you amass not only the money you invested, but also an interest amount – the exact interest rate depends on how much returns has been generated by the fund that you invested in.
SIP is growing in popularity among Indian investors because of its straightforward approach. As a product, it is so simple that anybody can start an SIP plan and take control of their financial future. One can start investing as little as ₹500 in an SIP that functions like a recurring deposit. Instead of a lump sum investment, SIP allows your money to accumulate over time and enjoy better returns through compounding.
Benefits of SIP
SIP investment offers the following benefits.
Power of compounding: Compounding begins when the returns on your investment start to earn further returns. When you invest in an SIP, the returns you earn get reinvested in the market to create a snowball effect.
Low initial investment: You can start an SIP for as low as ₹500 without hurting your wallet. Most mutual fund companies allow investors to top up their SIPs for free and adjust their changing investment goals.
Rupee cost averaging: Rupee cost averaging is an investing concept. In rupee cost averaging you are allotted more units when the fund’s NAV value is low and fewer units when the NAV value is high. In the long run, it averages out the cost of investing.
Convenience: SIP is convenient. Unlike stock investing, SIP doesn’t need extensive market research or portfolio rebalancing. So, once you select a good SIP plan, you can give instructions.
Types of SIP
Before investing, it is a good idea to understand the different SIPs available.
Regular SIP: The simplest form of SIP requires investors to make investments at regular intervals. You can select the tenure, investment amount, and frequency.
Flexible SIP: A Flexi SIP is similar to a regular SIP with an additional benefit where the investors can change their contribution towards the scheme.
Top-up SIP: You can top-up to increase your contribution to the SIP. It is a great option for salaried individuals with annual salary increments.
Trigger SIP: You can set up a trigger for the SIP to activate when a significant market event occurs. One must have the exceptional market knowledge to invest in Trigger SIP.
Perpetual SIP: This type of SIP doesn’t have a fixed tenure. It remains active as long as the investors choose to stay invested.
How to start SIP investment
Individuals can complete the online application process and start investing in the SIPs of their choice.
Set your investment goal: The first step includes determining what you want to achieve through investing. Accordingly, you can choose from the various mutual fund schemes available.
Complete KYC: The online process has made the KYC process easy and quick.
Choose an SIP: You can select an SIP scheme based on the following factors.
- Investment horizon
- Investment frequency
- SIP amount
- Your long and short-term financial goals
Invest in SIP through Angel One
Angel One has been trusted by 1 crore plus investors as a confidant in investment and financial planning. You can choose a mutual fund from the vast options available based on your investment objective, tenure, and risk appetite. Complete online KYC on our website and start your journey towards financial freedom on Republic Day.