Personal Finance Trading and Investing

The Ultimate Guide to SIP Investments

What is the first thing that comes to your mind when you think of investing money? For many people, the answer is limited to stocks, mutual funds, risk or returns. It can be because they do not know much about the various terms of investing and how to put their best foot forward.

Equities are an investment option to help you build wealth but come with high risk. On the other hand, there is PPF or Fixed Deposit with low risk and, thus, low returns.

Mutual funds are like the best of both worlds. You can invest through mutual funds into several securities like stocks, bonds, and other assets.

SIP Mutual Fund Investment

Systematic Investment Plan or SIP is a way to invest through mutual funds in a disciplined manner. It is a facility offered by mutual funds that allows you to invest a fixed amount of money at regular intervals in a selected scheme. You can use an online SIP calculator to estimate the amount you need to invest towards a specific financial goal.

Here’s a brief guide to help you understand more about SIP investment.

1] Managed by Professionals

One of the key advantages of investing through mutual funds is that they are managed by professionals. The fund managers are experts in researching various securities, companies, industries and business sectors to make informed investment decisions.

If you do not have investment expertise or time while being busy with other vocations, use a SIP calculator to start your mutual fund investment journey.

2] Diversification for Small Investments

Investing in a SIP also enables you to enjoy the benefits of diversification, even for smaller investments. This is different from equities in which a significant amount must be invested to achieve diversification.

As an investor, it is advisable not to put all eggs in one basket, which is possible through mutual funds. Additionally there are online SIP calculators to help you get an estimate of the wealth you can create with regular SIP investments.

3] No Strain to Other Financial Liabilities

Compared to the one-time investment of a large amount, SIP allows you to invest a small amount, starting from Rs. 500 per month. If you are the only breadwinner in the family, SIP makes investing more manageable for you as it does not create a hindrance against your regular finances.

If you have a goal of creating a specific amount as wealth for the future, an online SIP calculator can tell you about the monthly SIP investment to be made.

4] FAQs about SIP Investments

1) Is SIP different from Mutual Funds?

Many people think of SIP to be something different from mutual funds. However, the right way to understand SIP is as a mode of investment, and not a financial instrument. While investing in SIP, you decide the amount, SIP date and schemes for investment.

2) Can I Only Invest in Equity Funds Through SIP?

It is a common myth that investing in a SIP implies investing only in equities. You can choose to invest via SIP in equity, debt or hybrid schemes.

It is up to you to decide which scheme you would like to invest in based on the degree of risk you can accommodate. If you want to know more about the returns you can expect from a SIP, an online SIP calculator can help you out.

3) Is It Possible to Invest in SIP Online?

You can choose a renowned bank like Axis Bank to start a SIP online. If you already have an account with the bank, use your net-banking credentials to invest in a SIP. Start with using an online SIP calculator, choose the amount you want to invest, agree to the bank’s terms, and you are almost done.

For example, if you have a goal to accrue Rs. 5,00,000 in ten years, you can start with a monthly SIP of approximately Rs. 2,200, expecting a return of 12%.

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About the author

Michael Austin

Michael Austin is a Internet Entrepreneur, Blogger, Day Dreamer, Business Guy, Fitness Freak and Digital Marketing Specialist. He also helps companies to grow their online businesses.