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SIPs — What ? How ? Why ?

Updated: Jun 8, 2023

What is SIP ?

The basic structure of a SIP allows you to invest a fixed sum in numerous mutual funds on a regular basis. As a result, you might invest in a fund of your choice on a regular basis, such as every month, every three months, every week, every day, or any other periodicity with which you feel comfortable. SIP is nothing more than a wise investing strategy for mutual fund investments.

A systematic approach to investing, particularly in mutual funds, may provide a number of advantages over the long run. If you incorporate mutual fund investing in your monthly household budget, which you manage with your regular monthly income, this regular investing could turn into a habit.

How does SIP work ?

The premise of systematic investment is straightforward. It operates by purchasing shares or units of securities of a fund or other investment on a regular and recurring basis.

When you sign up for one or more SIP plans, the money is automatically deducted from your bank account and invested in the mutual funds you've chosen at the predetermined time interval.

At the end of the day, you will be assigned mutual fund units based on the NAV (net annual value) of the mutual fund. In India, extra units are added to your account based on the market with each investment in a SIP plan. With each investment, the amount reinvested grows, as does the return on investment.

Why to invest in SIP ?

  • SIP plans make you a disciplined investor.

  • With SIP since your investment amount is constant, for a longer period of time with rupee cost averaging you can take advantage of market volatility.

  • The small amount you invest daily grows up to a large corpus due as a sum of your contribution and the returns compounded over the years.

So, as the saying goes.. “SIP hai toh sahi hai”, invest today in a good SIP plan and watch your money grow.



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