There are so many SIP options wherein you can invest. You have to be really choosy about what you want and why. You should always keep your needs and expectations in mind before you take up any investments.
What is the concept of SIP?
An SIP (Systematic Investment Plan) is a perfect way of investing in the mutual funds. It permits the investor to invest in regular intervals. It is a deliberate way of investing and it helps nurture the habit of savings and accomplish the aim of wealth generation.
Under the realm of SIP, you can invest on a quarterly, monthly or even that of weekly basis as per your convenience. A fixed amount is auto-debited from your or the policyholder’s account and invested in mutual funds. A pre-decided number of units get allocated at the present market price. Since these plans are flexible in nature, the investors can enhance the amount or discontinue investing in the plan whenever they want to.
Why should you invest in SIP?
Here it would be good if you take an example of a common man. Max, a 32 year old accountant lives in a rented house with his lovely wife and a 4 year old daughter. His main financial goals for the next 20 years are, to purchase a car and a house and get his beloved daughter married. He does investment in bonds but that is it. Once projected into the future, his savings (produced from bonds) are not going to be enough to suffice his future expenditures and he’ll fall short of attaining his goals. It would primarily be because of two reasons:
- The unpleasant fact that the inflation will grow faster than that of the returns, eventually dwarfing the savings he did at the end of the investment tenure.
- Had he invested in the equity instruments rather than that of bonds, he might have earned a higher and better return.
Okay so Max justifies his choice one the pretext of safe playing. So the question stays intact, what should he do to attain a considerable growth without getting impacted by the commotion of the market. Well, the only way that Ravi can attain his financial goal is purchasing a Systematic Investment Plan. And it is a wonderful and a good enough reason for you as well to attain a SIP Investment.
How to get started with SIP
Talking about SIP, getting prepared is as significant as playing the game itself. You require following 4 convenient steps before you actually begin to do investment.
- Set the financial goals for yourself– Your goals have to be specific and achievable.
- Set a timeline – Decide when you require the money; this shall be your investment tenure.
- Choose how much you need to invest – With the assistance of a SIP calculator, find out the amount you require investing regularly to attain your financial goals.
- Make a choice – Consult the financial advisor and go for a plan that fulfils your needs well.
So, you should go for SIP if you want to make the best out of mutual funds.