SIP “Systematic investment plan” is an investment tool that helps to invest on a liquidity basis
You can Invest a particular amount on a monthly basis with a minimum amount of 500rs
In the long run, it provides good returns as a result it’s become a top-rated investment tool
SIP- Systematic Investment Plan
Systematic Investment Plan (SIP) is a disciplined and long-term investment tool
It helps to achieve your financial goals
It allows investing a fixed amount of money on a liquidity basis like monthly, in a mutual fund
So we can say that it’s one type of mutual fund
where you have the option to invest a small amount on a regular basis
Definition according to Wikipedia:
SIP is an investment vehicle offered by many mutual funds to investors, allowing them to invest small amounts periodically instead of lump sums. The frequency of investment is usually weekly, monthly, or quarterly.
Example –
Suppose you are investing 500rs monthly
you have chosen to invest for the next 20 years
then your invested amount will be – 500*12*20=120000
And suppose the bank offered you a return of 12% per annum
then your return will be – 379574
with the formula – M = P × [{(1+r)n – 1} / r]
the total amount you will get will be 120000+379574=499574
Importance of SIP
Investment in the form of SIP is beneficial in various ways-
1- It built discipline in the investor’s mind
2- You can invest a large amount without hitting your daily needs
3- Provide liquidity
4- Very easy to invest
How to calculate ROI
There are various calculators available to calculate SIP return
You can use Sharemarket Basics’ simple SIP calculator.
However, all banks have designed sip calculators you can use any of them.
How SIP work
In a SIP, investors can choose to invest a fixed amount of money regularly for a specific period, such as a year, two years, or more.
The money is invested in the chosen mutual fund or ETF, which is managed by a professional fund manager
The investor can choose the frequency of the SIP, such as monthly, quarterly, or annually, and the amount to be invested.
The amount invested is deducted automatically from the investor’s bank account and invested in the chosen mutual fund or ETF.
