Systematic Investment Plan: What Is SIP In Mutual Funds?
Do you know what gives someone a great sense of control and power? It is having a wide variety of options at their disposal. Take a moment and think about it. How concerned would you be if you lose your job? It’s a no brainer. But let’s say you took the time to build multiple streams of income for yourself and your family. Now, even if you lose your job, you still have other options to rely upon.
Therefore, you need to understand what is SIP in mutual fund. Not only will this knowledge free you from the shackles of a regular job, but it will also ensure that your post-retirement life remains blissful. You will be able to enjoy that sense of control and power we talked about.
Now isn’t that great? However, now, the question remains: What is SIP in mutual fund? Fret not, we will answer everything for you.
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What Is SIP In Mutual Fund: How Does It Benefit You?
If you have decided to build a second income stream, you might be tempted to invest in funds. However, before you make the impulsive decision to invest all in your chosen fund in one time only, do listen to what we have to say.
The market is unpredictable. So, if you feel that your chosen fund has been performing well for the past few months, there is still a high risk that it might underperform in the coming future. This might make things bad for you if you are riddled with loans and debts.
However, once you understand what is SIP in mutual fund, you can avoid this kind of loss.
SIP is the full form of Systematic Investment Plan. It is an organised and systematic method that investors can use to invest in their funds. It ensures that the investors invest in a disciplined manner, at regular intervals, instead of a lump sum amount. If you are using SIP, then you can invest in a weekly, monthly or yearly interval.
Now, when you invest in this fashion, you get to monitor the performance of your funds very closely. You can see if they dip or soar. Accordingly, you can also decide on whether you want to continue with the mutual funds you have chosen.
This is not the only advantage you stand to gain after knowing what is SIP in mutual fund. You will be gaining a bigger return, considering the compounding power in SIP.
Investing in SIP in Mutual Fund: How Do You Do It?
Now that you understand what is SIP in mutual fund, you are aware of how beneficial it can be for your life in the long-term process. So, the next step is to educate yourself about how to invest in SIP.
1. Risk Tolerance & Goals
Considering markets fluctuate, you should be aware of how much risk you are willing to tolerate. Not only do you need to reassess your risk tolerance, but you also need to be clear about your financial goals. Both these steps will help you in charting out a suitable SIP investment plan for yourself.
2. Choose Your Mutual Fund Wisely Before Investing
It is important that you really take your time, do thorough research on types of mutual funds in India and then select the one you will invest in. This selection should be done, considering your risk tolerance as well as your goals.
3. Fix the Date & Duration for Your SIP
Your funds will be automatically taken from your account and invested in the mutual funds scheme you have chosen. So, for this, you need to fix a date. Not only this, but you also have to fix the duration of your SIP.
4. See It Till the End
When you understand what is SIP in mutual funds, you realize that you have to see it till the very end. After all, SIP yields bigger results in the longer term. This is why you also need to keep an eye on fluctuating market prices.
Once you understand what is SIP in mutual fund, you realise how beneficial it can be for your financial future. It creates not only a second source of income for yourself, but it can also ensure that you are protected against market fluctuations. So do your proper research on types of mutual funds in India, select the right one as per your risk tolerance and goals, and then start your SIP plan.