All about SIP , Systematic Investment plans
SIP is a way of investing in Mutual Funds where you pay a fixed amount each month for a fixed tenure.Like If you take an SIP of 5,000 for 1 year on Jan 1 , 2008 , you will be paying Rs 5,000 per month for next 12 months.Please understand that its not a financial instrument , but a way of investing in mutual funds , some people confuse SIP with PPF ,NSC , and mutual funds , they think they can invest in "SIP" , its just a mode of investment.
When to invest in mutual funds through SIP ?
Investment through SIP must be done only when markets are uncertain or very volatile , when you don't know which side they are headed to ..
SIP will be beneficial only if markets really are volatile or going down after you invested. If it happens that markets turns bullish and starts going up , in that case SIP will not be beneficial and will give less return compared to lumpsum investment in start.
SIP is a simple concept and hence very powerful , lets see some reasons why its worth investing through SIP. It brings your average cost price for unit down (in volatile market).The biggest advantage of SIP is this part , There is a concept of rupee-cost averaging, In SIP you buy less when market and NAV are UP and you get more units when they are low. When this happens , the average cost of per unit is lower. The other advantage of SIP is that it makes you a disciplined investor,. Once you start SIP , each month you have to contribute certain money in mutual fund and that habit is cultivated.