5 Replies to “What do you understand by systamatic investment plan (SIP) in mutual fund investment?”

  1. In this your money is invested in mutual funds on a monthly basis. The advantage of SIP is that your investment overrides the vagaries of fluctuations of stock market eg if u decide to invest 1000 per month and the unit cost is 10 then u’ll get 100 units. But suppose due to the stock crash, the unit price comes down to 5 next month – no sweat – that month u’ll get 200 units. Suppose 3rd month stock mkt goes up and the unit price is 20, then u’ll get 50 units. So at the end of 3 months u have invested 1000×3= 3000 but the value of the units is 100+200+50=350×20 = 7000.

  2. SIP is one of the best investment option while investing in equity segment.rupee cost averaging will be worked out in SIP,and u will get good returns over a long period.money will be safe in fluctuations of the stock market.if u targeting for a longterm SIP is very very good option.u will be purchase units in different rates of the unit depending on the stock market.

  3. A SIP is a vehicle offered by mutual funds to help you save regularly. It is just like a recurring deposit with the post office or bank where you put in a small amount every month. The difference here is that the amount is invested in a mutual fund.

    The minimum amount to be invested can be as small as Rs 500 and the frequency of investment is usually monthly or quarterly.

  4. its a mutual fund which collect the money from people & invest in stock market.
    my personal advise to you that dont invest on it . coz all mutual fund are corrupt

  5. Systamatic Investment Plan (SIP) is as name suggests, regular investment of sum at an intervial monthly, weekly, quarterly etc. Though SIP generally applies to mutual funds, one could use this method to buy stocks directly or regular investment in other instruments like PF, insurance etc.

    SIP is an often used as a method of riding the market fluctuations effectively. e.g. If you are buying equity MF of a scheme at a regular investment say Rs. 1000/PM for a year. During this period if the markets go up you will get less units while market is down you will end up buying more units, hence over longer term you can ride away the risk of short term fluctuations. This method is also called ‘Dollar cost averaging’

    Though SIP is advised to reduce the risk of fluctuations and way to build a long term wealth, there are often risks due to human psycology.

    Assume one had started an SIP in early 1999 or say during the tech boom, most fund have been investing in tech co. at the tech bubble bursted very likely most investors or SIP will be happy initially and later after 6 months or so, it is likely you will get frustrated and stop SIP, this would mean SIP did not get any cheer. Hence it is essential to look SIP as real longer term option of multi-years to come and only carefully chosen schemes would last these multi-years is essential. You can not have SIP for schemes, which will go out of fashion with season.

    happy investing

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