There are few points on which everyone in this world agrees. Certainly, the unpredictability of the stock market is one of them. Even people with several years of experience are not always able to follow the dynamics of the stock market, so they are victims of wrong decisions. The waterproof trade strategy is something people find out of reach. It is something that can be pursued, but it probably never will.
But is it a correct idea? Are things like fate, luck, serendipity, etc., the only factors decisive in stock market investments? Or is there a way to deal with the stock market in a speculative way?
The answer to the above question can be found in the Systematic Investment Plan or SIP (also known as “Periodic Payment Plan” or “Contract Plan”).
Systematic Investment Plan (SIP) Unlike single investment plans, a SIP involves regular payments over a specified period. It allows investors to pool shares into a mutual fund by contributing a fixed (often small) amount of money on a regular basis. It offers the following advantages that are easily attracted to any investor.
Low pressure on your portfolio: With SIP, you can enter the stock market even with a small investment. Your inability to invest more or less may prevent you from investing in the stock market. SIP is the perfect solution to your problem.
Building for the future – We have specific needs that can only be met with long-term investments. These needs include children’s education, home ownership, post-retirement emergencies, etc. SIP provides valuable assistance in this regard. It helps you save a small amount on a regular basis. And in time it turns into a large sum.
Compound Returns: SIP not only helps you reach a large amount after a certain period of time. Instead, it helps you reach this amount at a young age, depending on when you start investing. You can accumulate a cool $ 70 if you start investing at 35. An early start at 25 can allow you to hit the same amount at 60.
Lowest Average Cost: In SIP, you experience a low average cost, average courtesy cost in dollars. Invest the same fixed dollar amount in the same investment at regular intervals over an extended period of time. You buy more shares in an investment when the stock price is low. And you buy fewer shares when the share price is higher. It could result in a lower average share price.
The average dollar cost strategy does not attempt to determine market time. Instead, it reduces the risk of investing a larger amount in an investment at the wrong time. It does the same thing by spreading your investments over months, years, or even decades.
Inadequate market timing – The previous two paragraphs tell you that SIP makes market timing irrelevant to you. The unpredictability and volatility of the stock market often play a deterrent role for ambitious investors like you. In SIP, you are completely free from this bad timing issue.
SIP operating mode
A typical SIP includes monthly investments over a period of 10, 15, or 25 years. Usually, you are allowed to initiate your investment with a modest amount.
You do not have direct ownership of the funds. Instead, you have an interest in the trust plan. The plan trust fund invests regular investor payments, after deducting applicable fees, in shares of a mutual fund.
Things to clarify before investing in a SIP
Certain things must be clarified before making a SIP investment. It includes the following:
to me. You must ensure that you continue to make payments during the life of the plan. Withdrawals midway will almost certainly lose your money unless you qualify for a full refund.
Second. Check the fees charged by the plan. Also, check the circumstances under which the plan waives or lowers certain fees.
C- Study the plan’s investment objectives. Note the risks of investing in the plan. And see if you are comfortable with them.
Return. Check your statutory money-back rights if your plan is canceled.