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What is SIP?


What is SIP?

The first thing that people think of when you say “SIP” is: Is it a type of mutual fund?

No, SIP isn’t a type of mutual fund, it is a mode of investment. There are two modes of investment in mutual funds, they are the lump sum mode of investment and the SIP mode of investment. You can choose either mode of investment to appreciate your capital. To calculate your returns from the SIP investment, you can use a sip calculator.

What is SIP?

SIP stands for Systematic Investment Plan. It is a mode of investment whereby you can invest some amount of money (a minimum of ₹500) in a mutual fund scheme at regular intervals of time. The time period can be monthly, quarterly, or semi-annually.

How Does SIP Work?

When you choose the SIP mode of investment, you purchase some units of the mutual fund. Now, if the market is on a high you get lesser units, if the market is on a low, you get more units. This means you do not have to time the market to make your investment. Once the investment tenure is over, you can redeem all the units you have got at the current market value. You can make use of a sip calculator to calculate your returns.

What Are the Benefits of SIP?

There are plenty of benefits of investing through SIP. They are as follows:

  • Power of Compounding

When you invest via SIPs, the returns that you stand to receive, get reinvested. This is known as compounding. Hence, in the end, it snowballs into a huge amount of money.

  • Low Investment Value

You can start investing in mutual funds via the SIP mode with as little as ₹500 per month. Hence, with such a low investment amount, any middle-class Indian can start investing in mutual funds.

  • Rupee Cost Averaging

This means that when the market is down you stand to get more units of the mutual fund and when the market is high, you get fewer units of the mutual fund. Therefore, you do not have to time the market.  The sip calculator can help you plan your investment goals.

Takeaway

SIP stands for Systematic Investment Plan and it is a mode of investment rather than a category of mutual funds.

You can use a sip calculator to calculate the returns on your mutual fund.

Choose SIPs if you are a first-time investor because they bring financial discipline to investing.

If you need help in SIP investing, choose to invest with mutual fund agent Money Assist. We are here to help you appreciate your capital securely.