Systematic Investment Plan in Mutual Fund is commonly named SIP is popular in India. Systematic Investment Plan is a good tool, if used properly can help you to achieve all your financial goals.
What is Systematic Investment Plan?
We all have various financial obligations. Long-term goals like retirement or purchasing a home require you to save and invest for many years. Yet irrespective of the amount involved and the time horizon, planning and investing money systematically and regularly enables you to sail through these obligations. A SIP could prove to be a simple and effective solution for achieving these goals.
A SIP is a method of investing in mutual funds, by investing a fixed sum at a regular frequency, to buy units of a mutual fund schemes. It is quite similar to a recurring deposit of a bank or post office.
Benefits of Systematic Investment Plan
1. What is your equation to investments:
EARN – SPEND = SAVE OR EARN – SAVE = SPEND
The first is a wrong way of investing. You should be saving in a disciplined manner and SIP enables you to follow the second, which is the correct equation of investments.
2. Power of compounding: SIP make sure that you are not only benefited on your investment but you also get returns over the interest which in overall will result generating greater returns.
3. Easy, Flexibility and Liquidity: SIP is easy to start, manage and stop. It gives you the flexibility to choose the desired scheme or to withdraw in parts. And with conditions, you have the money for contingency and emergency use.
4) You can also do SIP in ELSS (Equity Linked Saving Scheme) to save tax under section 80 C.
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