Things You Need to Know About Systematic Investment Plan (SIP)

Systematic Investment Plan (SIP) is the mode of investment in mutual funds in a systematic and regular manner. Investing in mutual funds through SIPs is considered one of the best ways to build a corpus in the long term. As the money gets invested in equity schemes or debt schemes so they are subjected to market risk. So before starting investing in the mutual fund through SIP you should pay attention to some of the factors and know about them.

As every month/quarter a certain amount will be deducted from your account and invested into the fund so investing in mutual fund through SIP is a vital financial decision. You need to plan out your expenses to ensure that on the fixed date enough fund remains in your bank account for the deduction of the installment amount.

There is no best time as such for SIP investment based on the soaring or sinking of the market. It’s all about practice and discipline. Over a period, the mutual fund tends to provide a decent growth of your money irrespective of market fluctuations. It is well proved that on investing a fixed amount regularly through SIP, the same invested amount will buy more investment when the market is low and less when it is high. So, an investor should stay put, whatever the growth condition of the market may be.

For many investors, the Net Asset Value (NAV) is the key factor for mutual fund investment. The reason is that a fund with lower NAV will give higher growth, while the one with high NAV will give lesser growth. Though NAV plays a vital role it should not be considered as the only deciding factor for investment. There are quite a few parameters that are still required to be considered like track record, fund management and volatility that determine the portfolio return. So, on considering the various parameters, the investors are advised to read the Scheme Information Document, Key Information Memorandum and Statement of Additional Information before investing.

In the case of mutual fund investment, you should always go for the background research and take advice. Though it is found that people are always reluctant to take advice regarding the financial matters for any reason. So, you should reach out to the financial advisors or professionals, a lot of them are available, who will help and guide you in formulating an investment strategy and making it work.

Once you have taken the decision to invest in the mutual fund through SIP and planned it out, then its time to put it in action. You can invest in many ways like you can buy it directly from fund houses, purchase it from financial planners or distributors and even through the banks.

Just to keep in mind investment in mutual fund is all about time spent and disciplined investment. Once you get accustomed to these 2 factors and due to the compounding, it will help you gain a corpus in the future.