Systematic Investment Plan (SIP) route is one of the best approaches to investing in mutual funds. It is not only safer but an extremely convenient way of building wealth over the long term.
Here are some of the basic q&a to know more about long term SIP investments:
What is SIP?
An SIP or a Systematic Investment Plan allows an investor to invest a fixed amount regularly in a mutual fund scheme, typically an equity mutual fund scheme.
For example: you pay 1000 per month for a fixed amount of time, like 5 years, at the end of 5 years you get 60000 (1000*60months) +returns. Returns are the profits you earned through SIP.
Why should I invest in SIP?
- It gives you financial discipline to your life.
- It avoids the stress associated with ups and downs of the stock market
- It gives you the advantage of compounding .
What is compounding?
When you invest over a long period and earn returns on the returns earned by your investment, your money would start compounding. This helps you to build a large corpus that help you to achieve your long-term financial goals with regular small investments
For ex: lets take the same 1000 per month investment scenario,
So at the end of five years you get 60000+returns
And now looking at your growth you want to invest your current amount (60000+returns) with your regular 1000 per month for another five years.
At the end of your second 5 year investment term now you have [(60000+return)+ return] and your second (60000+return). so along with your 120000 initial investment now you have your 3 times the profits.
That is power of compounding. That is the biggest advantage the SIP can offer you over long term investment even if your regular investment is low.
What is the minimum amount I need to start an SIP?
you can start investing in a mutual fund scheme through SIP for a minimum of 500
Are there any options of personalizing my SIP?
Yes , there are many options where you personalize the SIP based on your income stream
Though fixed monthly investment is the most popular one., there are many fund houses that allow investors to invest bi-monthly, monthly and fortnightly according to the investors convinience
Want to get started on investing in SIP?
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