SIP is the best way to invest in the stock market, which is a tricky and unpredictable place to be. Choose this tried-and-true plan and move forward toward a bright future.
There aren't many things that everyone agrees on in this world. And you can be sure that the stock market is one of them. Even people who have been investing for years don't always understand how the stock market works, which leads them to make bad decisions. People think that it's hard to find a foolproof way to invest in the stock market. You can try to get it, but you probably won't ever get it.
But is it a right idea? Are things like fate, luck, chance, etc. the only things that matter when investing in the stock market? Or, is there any way to be speculative on the stock market?
The Systematic Investment Plan, or SIP, is most likely the answer to the question above (a.k.a. "Periodic Payment Plan" or "Contractual Plan").
Plan for making regular investments (SIP) SIP is different from one-time investment plans because it involves regular payments for a set amount of time. Investors can buy shares of a mutual fund by putting in a fixed (and usually small) amount of money every month. And it has the following benefits that are sure to attract investors.
eased the strain on your wallet With SIP, you can get into the stock market with a small amount of money. You might not have invested in the stock market because you couldn't put up a pretty big amount. SIP is the best way to solve your problem.
Preparing for what's to come We have some needs that can only be met by investing in the long term. For example, you might need money for your children's education, to buy a house, or for emergencies after you retire. And SIP is a very helpful tool in this way. It helps you save a little bit of money every week. And over time, it adds up to a lot of money.
Returns on investment SIP doesn't just help you save up a lot of money after a certain amount of time. Instead, it helps you get to that amount sooner, depending on when you start investing. If you start investing when you're 35, you can have a lot of money when you're 70. You can get the same amount by age 60 if you start at age 25.
Getting the average price down In SIP you experience low average cost, courtesy dollar-cost average. Over a long time, you put the same fixed amount of money into the same investment at regular intervals. When the price of an investment's shares is low, you buy more of them. And when the price of a share is high, you can buy less of it. And you might end up paying less for each share on average.
With dollar-cost averaging, you don't try to pick the right time to buy or sell. Rather, it lowers the chance of losing a lot of money by investing a lot of money at the wrong time. It also does the same thing by spreading out your investments over months, years, or even decades.
Market timing irrelevance The last two paragraphs told you that SIP doesn't matter for you in terms of market timing. The unpredictability and volatility of the stock market are often a turnoff for people like you who want to invest. With SIP, you don't have to worry about wrong timing at all.
This is how the SIP works.
A typical SIP involves putting money away every month for 10, 15, or 25 years. Most of the time, you can start investing with a small amount.
You do not have full control over the money. Instead, you have a stake in the plan trust. After fees are taken out, the plan trust puts the investor's regular payments into shares of a mutual fund.
Things you should know before putting money into a SIP
Before you start a SIP investment, you should be sure of a few things. These are some of them:
a. You should feel sure that you can keep making payments until the end of the plan. If you quit in the middle, you'll probably lose your money, unless you can get a full refund.
b. Look at how much the plan costs. Check to see if the plan waives or reduces certain fees and under what circumstances.
c. Look over the plan's investment goals. Note the risks of putting money into the plan. And make sure you feel good about them.
d. Find out what your legal rights are if you have to cancel your plan.
