At best, Systematic Investment Plan (SIP) is a way to invest in the mutual fund (MF) of your choice and build a corpus over an extended period. There are two different types of investment options for you in MF and one of them is SIP. The other one is the lump sum payment where you invest amounts once outright and see the money grow!
What is a Mutual Fund?
The mutual fund is a type of pool where money comes from different investors for investment in varied securities. This investment can be anything including market securities, shares, and debt securities or their combination. Investors in mutual funds share both profits and losses that the securities are prone to in accordance with the fluctuating market.
Why People Invest in Mutual Funds?
Mutual fund is a safe investment mainly because the management of this fund is through professional services that understand the market and can make knowledgeable decisions. There is a full time monitoring of the process present, which makes real time decision making possible. Execution of trading occurs on cost effective and largest scales to ensure minimum risk and high returns. Diversification of investment is the key element and this is the main reason why people prefer this kind of investment option. This minimizes the risks substantially. The initial costs of investing in mutual funds are quite low and this makes it a feasible option for everybody.
What is Systematic Investment Plan?
The Systematic Investment Plan calls for saving small amounts over an extended period. Through careful and regular investment, it is possible to create a substantial lump sum, which can help you to tide over financial constraints or provides the needed help when extra money is required in your personal life. Briefly, SIP plan is all about compounding wealth through systematic investment on a long-term basis.
Why Should you Invest in SIP?
Those who have long-term plans in their personal or family life are better off with Systematic Investment Plan when considering mutual fund investment options. It is necessary to understand that one-time payment option on the other hand does not give MF investors a high degree of benefits, since it does not take into account the fund downturn, which SIP plan does. No wonder Systematic Investment Plan becomes the preferred option when it comes to investing in a mutual fund of your choice.
Systematic Investment Plan (SIP) is a way to invest in a mutual fund, which is opposite of the single premium option. Whether you want to own a car in the near future or keep money aside for the higher education of your child it is easily possible through SIP. Mutual fund and Systematic Investment Plan are related to each other and in order to get the benefit of one you need to go through the other!