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Systematic Investment Plan (SIP)

What is an SIP in Mutual Funds?

SIP stands for Systematic Investment Plan. It is a method of investing in mutual funds where investors regularly contribute a fixed amount of money in selected schemes at predefined intervals (usually monthly or quarterly). The fixed amount of money can be as low as Rs. 500. By taking the SIP route to investments, the investors can invest without worrying about the market volatility. SIP allows investors to get the benefit in the long-term due to average costing and power of compounding.

How SIP works?

In SIP, the investor selects a mutual fund scheme and determines the desired regular investment amount. Subsequently, the investor provides a bank mandate to the mutual fund, authorizing automatic deductions of the specified fixed amount from their bank account. These funds are utilized to purchase units of the chosen mutual fund scheme. This streamlined process offers simplicity and convenience. This also helps the investor to stick to a plan, ensuring they're consistently saving and investing for the long term.

Benefits of SIP

SIPs are a disciplined and convenient way for investors to participate in the financial markets, especially for those who may not have a lump sum amount to invest at once. SIPs are considered a suitable option for long-term wealth creation, as they help in mitigating the impact of short-term market fluctuations. The following benefits make SIPs a popular and effective investment strategy for individuals.

Flexibility and Convenience:

Investors have the flexibility to choose the SIP amount, frequency (monthly, quarterly), and the option to increase, decrease, or stop contributions as per their financial situation. This flexibility accommodates changing financial goals and market conditions.

Rupee Cost Averaging:

SIP follows the principle of rupee cost averaging. Since the investor is buying units at different NAVs (Net Asset Values) at various market levels, the average cost per unit tends to be lower over time. This strategy helps reduce the impact of market volatility.

Small Investments:

SIPs allow investors to start with a small amount, making it more accessible for those who may not have a lump sum to invest.

Discipline:

SIPs instill financial discipline as investors commit to making regular investments. This helps in building a habit of saving and investing over the long term.

Long-Term Wealth Creation:

SIPs are designed for long-term wealth creation. By consistently investing over an extended period, investors benefit from the compounding effect, where the returns on their existing investments generate additional returns, potentially leading to significant wealth accumulation over time.

How much one should invest in SIP?

The amount you should invest in a Systematic Investment Plan (SIP) depends on various factors, including your financial goals, risk tolerance, current financial situation, and investment time horizon. If you are unsure about the amount, it's okay to start with a smaller SIP amount that aligns with your budget. You can always increase the investment amount gradually as your financial situation improves.

How to start an SIP:

You can invest in SIPs either online or offline. For the offline method, you have to fill out physical application forms and submit KYC documents. On the other hand, the online process lets you register on the mutual fund company’s website by providing the required details. As an AMFI registered Mutual Fund Distributor, Zenmoney can assist investors in making the entire investment process more convenient and streamlined. Whether you choose to invest online or offline, both methods give you the flexibility to start and manage your SIPs based on your preferences.”

What is Top-up SIP?

A "Top-up SIP" in mutual funds refers to the option for investors to increase their existing Systematic Investment Plan (SIP) amount at specific intervals. This allows investors to enhance their contributions gradually over time, adapting to changes in their financial capacity and goals.

SIP Calculator:

You can utilize the provided SIP calculator to estimate the potential wealth accumulation achievable through a Systematic Investment Plan (SIP).

Launch SIP Calculator

Common mistakes made by investors in SIP?

Early Withdrawals: Withdrawing investments prematurely is a common mistake made by investors.

Neglecting Increment and Top-Up: Failing to increase the investment amount over time or not utilizing top-up options is a common oversight.

Frequent Scheme Changes: Regularly switching between investment schemes is a common error committed by investors.

Inadequate Bank Balance Management: Not maintaining a sufficient balance in the bank account in a timely manner is a common mistake observed among investors.

Name	Anasurya Sahu
Address	Zen Securites Ltd, 6-3-788/32, 3rd Floor, Vamsee Estates Ameerpet, Hyderabad 500016.
Contact No	+91-40-44232216
Email Id	grievance@zenmoney.com