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Systematic Investment Plan‘ (SIP) is an investment vehicle offered by mutual funds to investors, allowing them to invest small amounts periodically instead of lump sums. The frequency of investment is usually weekly, monthly or quarterly.

Reasons for taking SIP(Systematic Investment Plan).

You Can Stop The SIP Anytime

There is no fine if you decide to stop an SIP plan. If you want to stop it, you simply have to opt out of the SIP plan. This has a very big advantage over recurring deposits (RD) which usually put a fine on you if you want to stop it.

You Can Skip SIP Payment

If for some reason you don’t have enough balance in your account for the SIP investment of a certain month, you can still continue with the SIP next month without any problems. No fine or charges will be levied against you. In the case of RD.

You Can Invest Very Small Amounts

With SIP plans, you can start investing in mutual funds with an amount as little as ₹500 a month Even if your savings are not very large, you can still take advantage of

You Benefit From the Effect of Compounding

When you invest using an SIP plan, your monthly SIP investment gives returns. Those returns are added to

How does a SIP work?

  • Every month/quarter a specific amount (decided by the investor at the start of SIP) is deducted from the investor’s bank account and invested in the chosen mutual fund scheme.
  • Every time the amount is invested, units of the scheme (as per NAV) are allotted to the investor.
  • Since your investment amount gets broken down in equal installments, your investments average out the market ups and downs resulting in averaging your cost.
  • Investor can redeem (withdraw) units or switch out to another scheme, anytime he/she wishes to do so. (Please check the scheme related documents as some mutual funds would have a specified lock-in period.)

TIPS

#1 You can start SIP investments with as little as ₹500 per month.

#2 The SIP option is available for all kinds of mutual funds (except liquid funds), though it works best for equity investments.

3# One has to be careful about ensuring the availablity of funds in the bank account, incase of ECS mandate as you cannot pay the missed SIP amount at a later date.