What is a Systematic Investment Plan - How to Create Wealth With SIP Investment?
All these times, you are hearing and seeing this word called SIP. Now as a beginner, you might think, what is SIP? If you have already googled the term, the basics must be understood. Yet, how good is SIP for your wealth generation and meeting financial goals, you might wonder.
Investing in mutual funds through a systematic investment plan (SIP) is an effective way to create wealth. Unlike a lump sum investment, systematic investing strategy works on the principle of Rupee-cost averaging.
This means that the same security is bought at a fixed amount at predetermined intervals. It allows an investor to choose the frequency of their investment, while keeping the investment amounts small.
Systematic investment plans are a popular choice among investors. By allowing an investor to invest a specified amount at regular intervals, they reduce risk and increase the potential for return. In addition, it helps develop a regular savings habit.
If you are new to investing, it is a good idea to start small and build up your investment portfolio gradually. This will allow you to take advantage of the compounding effect of your investments, which can result in a large corpus of money in the future. A monthly SIP of Rs 15,000 over 15 years, with a 20% return in Algrow or AllRounder, will earn more than a crore in total. You can use our SIP Investment Calculator to calculate the SIP amount as per your needs.
Why is SIP investment ideal for everyone?
This type of plan can be a very good investment option for a newly employed person. The money is invested on a regular basis, and the contributions will automatically increase in line with your salary increase. You can also instruct to increase your contribution amount at predetermined intervals, such as every six months.
Things to remember before you start SIP
It is important to choose a good Asset Management Company (AMC) for your SIP. The company should provide a range of investment options, and should have an efficient investment process to ensure that your funds are managed well. It is also helpful to have a professional adviser to help you decide on the best SIP.
You should also consider investing in a growth equity fund, as these funds generally have higher returns than other types of mutual funds. Typically, growth equity funds consist of a wide range of investments. This will include shares of companies that are highly volatile and have a high potential for losses. However, you can also invest in a growth equity fund for a shorter period of time, if you are concerned about the volatility of the market.
A systematic investment plan SIP can be used to invest in a variety of different mutual funds, including equity funds, bond funds, money market funds, and more. These are all investment vehicles designed to be easy to understand and manage. They are also a great way to diversify your investment portfolio, so that you can avoid a single investment losing all of its value.
To invest in a SIP, you need to select a mutual fund scheme and then make regular contributions to your account. This is a convenient way to save regularly.
You can also choose to use a step-up SIP, which can be a great option for new employees. By increasing the amount you are contributing at certain intervals, you can build up your investment portfolio slowly, as you become more comfortable with the concept of systematic investing.