What is the full form of SIP?

What is SIP?

SIP can be expanded as Systematic Investment Plan. This is a method by which you can make investments in mutual funds. In this type of investment, you will have to choose a type of mutual fund and start investment as per the rules and regulations. The investment has to be made at fixed intervals. You can spend a small amount and get a high return.

Types of SIP

SIP is of many types and we will discuss some of them here.

Fixed SIP

This is a type of SIP in which investment has to be done at regular intervals.

Flexible SIP

This is a type of investment in which the amount to be invested varies in each installment.

Perpetual SIP

This is a type of SIP in which the ending date of the SIP is not specified by the investor.

Trigger SIP

This is a type of investment in which trigger points are fixed by an investor. The investment is automatically done when the market reaches any of the trigger points.

Top-up SIP

If an investor wants to increase the amount of money for a Fixed SIP, he can use a Top-up SIP.

Step-up SIP

This is a type of SIP in which the amount of investment is increased at regular intervals.

Value Averaging SIP

This is a type of SIP in which a variable amount of money is invested. This investment depends on the current value of the investment.

Multiple SIP

This is a SIP in which an investor uses a single SIP to invest in multiple SIPs.

How does SIP work?

You can apply for one or more SIP plans and the amount for all of them will be deducted from your bank account and invested in these SIPs automatically at regular intervals. You will receive the amount when the tenure of an SIP is over. This will depend on the NAV of the mutual fund. For each mutual fund, an extra amount is added besides the one that is deducted from your account. This addition depends on the market rate. The additional units are added and become large for each reinvestment.

When does the SIP investment have to be made?

Investment in SIPs can be started at any time of the year. You need to choose such a plan in which risk is minimal. Investors make investments for long-term goals so there is no fixed time for making investments.

Advantages of SIP

SIP has many advantages and some of them are listed below −

• You will become a disciplined investor

• It is easy to manage and set up SIPs as the investment amount is deducted automatically every month

• Investors can choose the amount they want to invest

• SIP is cost-effective as investors can invest any amount of money

• Trained professionals are given the task of managing mutual funds

Disadvantages of SIP

SIP has some disadvantages and some of them are listed below −

• The market keeps fluctuating and a decrease in the market can lead to a decrease in the value of SIP investment

• Beginners do not choose the perfect time of investment so do not get better results

• SIP has limited control as once investment starts the amount will always be deducted without considering the financial condition of the investor.

Conclusion

SIP can be expanded as Systematic Investment Plan and people can make investments at any time to get the profit. The money that investors want to invest is deducted automatically from their accounts. The amount of returns increases with the increase in the amount of funds invested. Many people invest in SIPs to save money.

FAQs

FAQ 1: What is the full form of SIP?

Ans: SIP can be expanded as Systematic Investment Plan.

FAQ 2: Can we cancel SIP whose period is “Till Cancellation”?

Ans: Yes! You can cancel that SIP

FAQ 3: Can we auto-renew the SIP?

Ans: Yes! You can auto-renew the SIP at the time of registration.

FAQ 4: Can I cancel the auto-renewal?

Ans: Yes! You can cancel the auto-renewal.

FAQ 5: Can I Pause and Resume my SIP?

Ans: Yes! You can pause and resume your SIP. The pause can be done up to 3 installments.