Monday, 7 March 2016

SIP Plans – Your Path to a Safe and Financially Secure Future

Did you know that you can calculate your expected rate of return on systematic investment plans (SIPs) through the SIP calculator online? Other calculators also let you calculate the amount you have actually gained till date through an SIP. This helps you plan your future goals better. Mutual fund investment lets you invest in the stock market without directly exposing your assets to market volatility. It is considered to be an appropriate tool to hedge risks and diversify your portfolio. Objective oriented investments can help you build a significant corpus, which can be used as a retirement fund or to fulfil other financial responsibilities, such as a child’s education and marriage. What if I say that you can meet your goals in a much shorter time and by investing a much lesser amount in one go? This is possible through an SIP. 

mutual funds in India

What is SIP?

A Systematic Investment Plan is a disciplined approach towards investing in mutual funds in India. It lets you contribute a certain sum at a pre-set date every month towards a mutual fund. It helps you bring regularity and discipline to your investments. Also, it helps lower the burden by allowing you to invest as little as possible at one time. It is one of the best tools for money management and wealth creation. 

How Does it Work? 

You have to instruct your bank and activate auto debit. A predetermined sum of money is then auto-debited from your bank account every month. This money is then used to buy mutual fund units that you have invested in. The units are then transferred into your demat account. The purchase takes place according to the NAV for that particular day.

How Does it Help Accumulate Wealth?

An SIP can help you maximise the power of compounding. In other words, money gets compounded more number of times over a long horizon of time. You can also benefit from rupee-cost averaging. In such a case, you buy fewer units when the prices are higher and more when the prices are low at the same cost. This lowers the average cost of investment in the long-run while eliminating the need to time the market. SIPs are especially beneficial for long-term investments.

You can exit an SIP as and when you wish to. It invests in open ended schemes, therefore you can withdraw your money as well. You can also increase or decrease the amount you contribute every month. You can also contribute monthly, quarterly, half-yearly and so on. You can extend a plan if you have not been able to achieve the set target. Mutual funds in India may have a minimum limit for investment. Generally, companies set Rs 500 or Rs 1,000 as the minimum limit. 

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