So, the total Investment corpus of that person Y would be 5,28,000. Y begins investing for his 50th birthday at the age of 30.Īssuming the returns of 7% and a monthly investment of Rs.1000. Heard about the power of Compounding? Saving a little sum of money regularly for a long time can have an unbelievable effect on compounding. This way, SIPs minimise your risk and ensure that you purchase the units at a low average cost. When the markets rise, the investors get lesser units and when the markets fall, then the investors get more units. SIPs can assist you in escaping the volatility of the market. Moreover, SIPs generally work on two principles i.e., Rupee Cost Averaging and Compounding. Once you redeem those units, the value of the units is credited to your account. These units of SIP keep on accumulating till the tenure of your investment. In a SIP, the units of mutual funds are purchased at predetermined intervals based on their Net asset value or NAV. With that being said, it is always a good option to understand how SIPs work and make your money grow faster. These are the professionals who have the required knowledge of the market, they invest in different areas after analysing the market. Because SIPs are generally managed by a team of experts, which are known as the fund managers. With the help of a systematic investment plan, you don't need to bother about how money is being handled. But for your knowledge, let's understand how SIP works. To be very honest, you do not even have to wonder how SIPs work because you only need to invest a fixed sum of money at regular intervals to generate returns in the future. But how SIP works? To know more about it, keep reading further. Now you have a quick understanding of the different types of SIP. This SIP lets you set a trigger to automatically switch to another scheme if the market becomes volatile. Trigger SIP is for experienced investors. This is much more convenient when you do online SIP. However, a fixed amount is decided at the beginning of a SIP but it is flexible enough to get changed. These sips offer you the convenience of increasing or decreasing the investment as per your wish or cash flow. The investments keep on going until and unless you wish to stop them. While starting a perpetual SIP, the end date is not definite. Further, after six months it will rise to 4000 and so on. That means, after the end of six months your SIP will become Rs. For instance, you can increase your SIP of 2000 per month by Rs.1000 after every six months. Under this SIP, you can increase the amount of your SIP periodically. Here they are:Īs you excel in your career and start earning more and more, then you can use top-up facilities to increase your investments. Wondering what are the different types of SIPs? C'mon, let's have a look at four main types of SIPs. So, while investing in mutual funds, your mission should be to start investing early to fetch the maximum returns you can. So, if you wish to maximise your end returns, then you need to start early. In the case of SIP, the sooner the better! SIPs are best when you start them from a young age. Here, the investor doesn't have to worry about the timing and volatility of the market.Īll in all, the SIP or Systematic Investment Plans offered by mutual funds are one of the best ways to make an entry into the investment world for the long term. SIPs have been becoming very popular among the Indian Mutual Fund Investors because it helps in investing in a much more disciplined and systematic manner. This way, you will not have to worry about depositing every month, your banks will deduct the amount automatically. Also, you can automate the process by giving instructions to your banks. It is quite similar to recurring deposits. In SIPs, one can invest or start with even 500 INR per month. The Systematic Investment Plans offered by the mutual funds offer various schemes where an individual can easily invest a fixed amount at regular intervals- say once in a quarter, in a month or one can even invest in a lump sum. SIPs are generally for the investors who wish to begin investing but do not know how and where. It is an investment route generally offered by mutual funds. SIP is an acronym for Systematic Investment Plan.
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