SIP is a Systematic Investment Plan in which you put a fixed sum of money in a mutual fund scheme or other investment plans at predefined intervals. Mutual fund companies offer this facility to allow shareholders to invest in a disciplined manner. The major reason why many people prefer SIPs is because they enable the investor to start investing on a regular basis, from a small amount to a large amount, as per their needs and financial goals.
There are many important concepts you must know related to SIPs. This article will brief you on everything you need to know about SIPs, such as what is stock SIP, its benefits, and the best stock for SIP.
What is Stock SIP?
SIPs (Systematic Investment Plans) follow the principle of periodic investments wherein an investor invests a fixed amount of sum at a stipulated period. The fixed sum is accumulated in one of your preferred mutual fund schemes. Your investments build up over time, and potential returns are manifold.
The returns you earn from SIPs are further re-invested, depending upon the mutual fund plan you have opted for. However, you can also make partial withdrawals from your SIPs. However, only if you have invested in ELSS, you cannot redeem your SIP investment before 3 years as these funds have a 3 year lock-in period.
You will be glad to know that you can start SIP with as low as Rs.100, making it ideal for all traders to invest! Once you start a SIP, you can diversify your portfolio and manage risk by investing in different sectors & companies.
Benefits of Stock SIPs
By now you know what is stock SIP: now let’s understand the benefits you can avail by investing in them. You can start a SIP in debt, equity, hybrid, gold, and international funds. The best part is that you can choose an investment period as per your choice, starting from 6 months to a 1-year plan and can go up to 10 years.
Thinking to start SIP in the share market? Let’s dive in to know some of the benefits of Stock SIPs:
1. Start SIP with Ease
Many people put off investing decisions until their financial situation becomes stable. However, with SIPs, you just need a small amount of capital to contribute each month.
For example- it is easier to pay Rs.10,000 each month rather than paying Rs.1,20,000 at the same time. It is the major advantage of SIP as it allows you to invest every month instead of in one go. Additionally, when you invest in SIP, your investments are looked after by seasoned fund managers.
2. Rupee-Cost Averaging
Rupee-Cost Averaging is an approach that tells you to invest money in the stock market at regulated intervals, irrespective of the market’s rise or fall.
By opting for SIP investments in mutual funds, your risks decrease to a great extent. This method works well because it uses rupee-cost averaging. By investing regardless of the current market price, you reduce risk and average out the cost of your investment over time. In the long run, it benefits you.
3. Disciplined Investment
Investing in SIP for the long term is the most disciplined form of investment. One advantage of starting a SIP is that you can make frequent investments and achieve your goals within a time frame. Plus, it helps you build a disciplined habit of saving and investing every month, which is important for long-term financial success.
You can also use an online calculator to calculate your SIP contribution and estimated return.
How to Invest in SIP?
Now that you know the SIP advantages, you should know how to invest in SIP:
- After analyzing your financial goals, risk tolerance, and investment time horizon, you must select the mutual fund scheme to invest your money.
- Once you have selected a SIP, you can register for an account with AMC online by providing your details, such as name, mobile number, and email address.
- Now, you need to choose which SIP you want to opt for.
- The next step is to set the frequency and amount you are willing to invest in SIP.
- Upload your KYC paperwork, and print a copy of your cancelled check to get started with the chosen SIP.
Best SIP Funds to Invest In
SIP mutual fund investments are worthwhile whether you are a novice investor or a seasoned investor wishing to strengthen your portfolio.
Still not able to find the best stock for SIPs to invest your money in? Some of the best stocks for SIPs with the highest returns in the market include:
- TATA Digital India Fund
- Aditya Birla Sun Life Digital India Fund
- SBI Technology Opportunities Fund
- ICICI Prudential Technology Fund
- Franklin India Technology Fund
It’s a Wrap!
SIP only requires a small monthly investment. The earlier you start investing regularly, the more easily you will achieve your financial goals. So, start a SIP today and realize the power of compounding!
Nikita Sikri is a content specialist who simplifies complex ideas and produces SEO-driven content for SaaS and AI-writing platforms. Her strategic writing skills generate leads, nurture them and boost ROI.
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