All You Need To Know About Systematic Investment Planning
Not all of us have the capacity to make sizeable investments in one go. Many wish to make investments in the most risk free manner and in the most affordable price bracket. For such conscious investors, SIP i.e. Systematic Investment Plan is the best means for growing their money. For those who overlooked this investment mode thinking that this is a mutual fund, theres news. Systematic investment plans are not a type of mutual fund, but a way of investing in mutual funds. Heres more on it.
There are two ways of investing in mutual funds A one-time payment under which you directly hand over a cheque of the amount you wish to invest and get the fund units depending on the value of the units on that particular day.
You can also make periodic investments, often referred to as systematic investment plan. So, if you plan to invest around Rs.1000 every month, you can hand over the amount each monthto your fund. At the end of the year you would have invested around Rs.12,000 in your fund.
If the NAV on the day you invest in the first month is Rs.20, you can buy 50 units; but if the NAV in the nest month is Rs.25. You end up buying 40 units. Then again in the third month if the NAV goes down, you can get your units at Rs.18 or so, this means you buy 55.56 units. So after three months youll have 145.56 units and on an average youd have spent Rs.21 per unit. This is because you got more units when the NAV fell and less when it went high.
With the systematic investment planyou have the liberty to start your investments with an amount as small as Rs.500. However, every fund has stipulated amount to start with. Some let you invest with Rs.500 per month while others may not accept an amount below Rs.1000. Some policies insist that SIP investment must be done monthly; while some let you invest once in three months or once in six months. They give you fixed dates that you can choose from to pay the money towards your fund. You can make the payment either through Electronic Clearance Service or through post-dated cheques.
Also, you will have to state for the number of years you wish to invest in a policy. In case you choose to continue with a systematic investment planfor 2 years and midway realise you cannot continue with it any longer, all you have to do is inform the fund 15 days prior to the pay-out. The policy will be discontinued and you have the liberty to keep the money with the fund and withdraw it when you want.
There are two ways of investing in mutual funds A one-time payment under which you directly hand over a cheque of the amount you wish to invest and get the fund units depending on the value of the units on that particular day.
You can also make periodic investments, often referred to as systematic investment plan. So, if you plan to invest around Rs.1000 every month, you can hand over the amount each monthto your fund. At the end of the year you would have invested around Rs.12,000 in your fund.
If the NAV on the day you invest in the first month is Rs.20, you can buy 50 units; but if the NAV in the nest month is Rs.25. You end up buying 40 units. Then again in the third month if the NAV goes down, you can get your units at Rs.18 or so, this means you buy 55.56 units. So after three months youll have 145.56 units and on an average youd have spent Rs.21 per unit. This is because you got more units when the NAV fell and less when it went high.
With the systematic investment planyou have the liberty to start your investments with an amount as small as Rs.500. However, every fund has stipulated amount to start with. Some let you invest with Rs.500 per month while others may not accept an amount below Rs.1000. Some policies insist that SIP investment must be done monthly; while some let you invest once in three months or once in six months. They give you fixed dates that you can choose from to pay the money towards your fund. You can make the payment either through Electronic Clearance Service or through post-dated cheques.
Also, you will have to state for the number of years you wish to invest in a policy. In case you choose to continue with a systematic investment planfor 2 years and midway realise you cannot continue with it any longer, all you have to do is inform the fund 15 days prior to the pay-out. The policy will be discontinued and you have the liberty to keep the money with the fund and withdraw it when you want.
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