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What is Systematic Investment Plan (SIP)?

SIP (Systematic Investment Plan) - is one of the most disciplined approach to investments in mutual funds. It lets you set aside a fixed sum of money at regular intervals (weekly, monthly, and quarterly) with an objective to generate capital appreciation in the longer run. SIP investment inculcates the habit of savings, the best way to save regularly without fail is to make your Salary Day as your SIP date.

  • Why should you invest in SIP?

    Other than being a disciplined approach to investments, SIP investment also has its own advantages. Two of which are – Rupee-Cost Averaging and Power of Compounding.
    Instead of trying to time the market, by investing on a regular basis, the investor benefits from the rupee-cost averaging factor. As the investments are done over different market cycles, the investor benefits from the market volatility by getting to buy more units of the same fund when the markets are low and buying lesser when the prices are higher.
    Compound interest is said to be the eighth wonder of the world by noted scientist Albert Einstein. The rule of compounding is simple, the earlier you start the more you benefit. Meaning for every single rupee that you invest, it is deployed to earn return. This in turn is also possibly poised to earn more returns in future. A regular SIP mutual fund compounds your money and helps create wealth.

  • Designing a rewarding SIP portfolio is simple. All you have to decide is:

    Asset allocation - It means how much money would you invest into a particular category of mutual funds every month. A typical asset allocation would be 50% in large-cap funds, 20-30% in small / mid-cap funds, and the rest in debt funds.
    Number of schemes - Your portfolio should have at least three schemes in it. On the upper side, it should not have more than seven-eight schemes. More than that, and your portfolio becomes difficult to track and manage. An ideal portfolio would have five schemes - four equity schemes and one debt scheme.
    Mutual fund schemes - This is the last step to designing a rewarding portfolio for the SIP route of investing. Look at curated lists of top-performing mutual funds like FundsIndia's Select Funds. Just pick one or two funds from each asset class, and that's it! Your rewarding SIP portfolio to build wealth like never before will be ready!