Do you know what a Systematic Investment Plan or SIP is? You must have heard from many people talking about SIP. You have many posts related to SIP on your mobile or Must have seen them on the computer. Still, you do not know what SIP is, then through this post; we will introduce you to all the information related to SIP, i.e. Systematic Investment Plan. What is SIP, and what does it work for? The data will be given to you through this post of ours.
There are many ways to save, but in addition to saving, increasing the amount of that savings is saving. We can invest or invest the amount of savings in many places and make a profit. But if we want to get regular and balanced money, we should invest the savings through SIP.
By doing SIP, not only are we increasing the amount of our savings, but through this, we also get tax exemption. Initially, people were confused about SIP. They considered it harmful, so today, our post will try to break that confusion of those people and what SIP means and all the essential information related to it, and it will be shared with you.
What is SIP
We have often heard that the ocean is formed by tiny drops, which is also 100 per cent correct. The same thing applies in the case of investment. It is not necessary that we always have to make a significant investment to earn a large amount.
By doing this, the person’s financial situation can be unnecessarily burdened because he will keep his financial condition in check in making significant investments. Therefore, if small investments are made regularly, then in the long term, significant funds can be prepared without any risk. SIP works similarly.
SIP is a straightforward way to invest with low losses. You can save for a big goal by investing a fixed amount every month/interval; then, after that small investment, you can get a significant amount in a long time.
Through SIP, the investor has to invest a certain amount in the stock market, Mutual Funds or gold etc., for a certain period, those who are not much aware of the stock market and those who are unaware of how the market works. For this investing through SIP is a much better solution. The SIP invests the stipulated amount at fixed time intervals. An investor can invest in the stock market, Mutual Funds and GOLD ETF through SIP.
SIP has brought mutual funds in the reach of the middle-class man as it makes even those who have a meagre budget invest. Those who are unable to invest big at one time invest 500 or 1000 ₹ every month. Can. So through SIP, he has come into the reach of such people. Middle-class people can earn big profits by making small investments for a long time.
In SIP, you invest a certain amount every month and buy Units by investing in a company’s fund; for example, the NAV of a company’s fund is ten ₹, and by investing 1000 ₹, you get 100 units in return. If you want to get out, you can earn a profit by selling those units purchased at the prevailing market price.
There are many advantages of SIP, such as tax exemption, ease of investment, etc. But there are some other benefits besides these; let’s know what the use of SIP: is –
1) Small investment – We know that it is necessary to invest a certain amount regularly at fixed intervals, so it is straightforward to withdraw funds for support from your routine and expenses.
You can get a large amount by investing a small amount continuously for a long time at fixed intervals.
If you invest 1000 ₹ every month at the rate of 10 per cent interest return, then in 15 years, you will get about 414,470 ₹ on completion of the period of your investment. Whereas in these 15 years you must have deposited only Rs. 1,80,000.
You can start investing in SIP with 500 rupees, which can provide you with good profits in the long run.
2) Ease of investing – Easy to invest Investing in SIP is effortless. For this, there is no need to worry; just after choosing your plan, on the fixed date, the mutual fund withdraws funds from your account and deposits them in your preferred method.
Your bank account is linked to your SIP scheme account. Just like you plan to invest 1000 ₹ every month, then every month, 1000 ₹ is transferred from your bank account to a SIP account. That sent money is used to buy the unit, which will benefit you in the future.
3) Risk reduction – The most significant and foremost advantage of SIP is that its risk is pretty low. Suppose you have fifty thousand rupees to invest in the stock market. You put those rupees together in the stock. Now you do not know whether the market will go up or down the next day.
This would be quite a risky deal. If this investment is distributed in a short interval, then the risk decreases. We can save ourselves from losing the stock market by depositing these 50,000 rupees in a gap of 10 instalments of 5000 ₹. Similarly, SIP protects us from stock market failures by investing a small amount due to not putting a considerable amount together.
4) Tax exemption – When you invest in SIP, you do not incur any tax on investing or withdrawing the amount. But tax-exempt schemes have a lock-in period such as three years. You can get tax exemption by investing in them.
5) Systematic and disciplined investment – to invest in SIP, a small amount (according to your plan) is funded regularly by withdrawing from your account. With this, discipline and order are maintained in your investment process. This discipline encourages you to save and instils the habit of keeping you.
6) Benefits of Compounding – The word Compounding means getting interested in interest also. Whenever an investment is made in SIP, and whatever return is received on the amount invested, it is re-invested back in the same place, which increases the investor’s profit and gains the same. Increase comes.
7) Facility to withdraw money from SIP – Most SIP schemes do not lock-in period. The Lock-in period is the time without which you cannot start your money from the scheme. But most SIP schemes do not have a lock-in period.
Investors can decide to continue or stop investing in SIP according to their needs. With this, the investor gets not only good returns but also gets advanced liquidity at his convenience.
Today you can start investing in SIP at the rate of just 500 ₹ every month. In this, you do not need to choose Mutual Funds. Most of the things in this are automatic. The benefit from SIP is very high, and its loss is negligible.
If you are losing a little money from your daily life, you should invest it through SIP. Even though that money is still small, after passing a few years and investing regularly, that little money will make you collect a big fund. You can use them as you want.
What did you learn today?
I hope you guys have understood about SIP. I request that you share this information with your neighbours, relatives, and friends to have awareness among us, and everyone will benefit a lot from it.
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But still, if you see any deficiency in this post, what is SIP? Then please give your opinion in the comment box and help us to correct that deficiency; thank you.