As you go through our website you would see posts like : why you should consider SIP (this article) with couple of others like: why you should look at Debt Fund also and in the future also you might might be seeing others. The key point is there are large options available in the market. Each option has its own speciality .Say some of us wants to have consistent income , some of us may be daring to Risk our Investment but wants to yeild a high return. With SIP’s help you can invest a fixed amount in mutual funds step-by-step monthly or quarterly over a period of time, thereby averaging out your cost of investing and benefiting from the power of compounding. The power of compounding works best as you stay invested helping your money earn money over the years. After all, it is the time in the market and not timing the market that helps you create wealth .
How SIP works?
SIP is a method of investing a fixed sum, regularly, in a mutual fund scheme. SIP allows one to buy units on a given date each month, so that one can implement a saving plan for themselves. The biggest advantage of SIP is that one need not time the market. In timing the market, one can miss the larger rally and may stay out while markets were doing well or may enter at a wrong time when either valuation have peaked or markets are on the verge of declining. Rather than timing the market, investing every month will ensure that one is invested at the high and the low, and make the best out of an opportunity that could be tough to predict in advance.
An investor can invest a pre-determined fixed amount in a scheme every month or quarterly, depending on his convenience through post-dated cheques or through ECS (auto-debit) facility. Investors need to fill up an Application form and SIP mandate form on which they need to indicate their choice for the SIP date (on which the amount will be invested). Subsequent SIPs will be auto-debited through a standing instruction given or post-dated cheques. The forms and cheques can be submitted to the office of the Mutual Fund / Investor ServiceCentre or nearest service centre of the Registrar & Transfer Agent. The amount is invested at the closing Net Asset Value (NAV) of the date of realisation of the cheque.
In short – Why SIP?
Disciplined approach to investments
No need to time the market
Harness the power of two powerful Investment strategies:
Rupee Cost Averaging – Benefit from Volatility
Power of Compounding – Small investments create Big Kitty over time
Lighter on the wallet
Reap benefits of starting early
Secret to achieving MuchMore with SIP
List down your dreams and goals and work out a plan to achieve them through SIP
Ascertain the monthly/quarterly SIP required to achieve your goals
Identify the scheme(s) in which you would like to invest and complete the formalities for SIP investment including forms and cheques
Invest for the long term as the twin benefits of power of compounding and rupee-cost averaging work through different market cycles.
Diversify your investments for your dreams through multiple SIPs in different schemes to optimise returns as per your needs.
Source : SBI MF